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Contents
Executive Summary 1
I INDO-GERMAN BUSINESS OVERVIEW 3
Automotive and Components 7
Defence 9
Education 12
Renewable Energy 14
Financial Services 18
Food, Consumer Goods and Retailing 21
Hardware and Electronics 23
Media and Entertainment 28
Pharmaceuticals 30
Science and Technology 32
SME – SME Cooperation 36
Tourism 38
Transport and Logistics 41
II LOCAL BUSINESS ENVIRONMENT AND 43

REGULATION IN INDIA AND GERMANY
Way Forward 51
Disclaimer
The information and opinions contained in this document have been compiled or arrived at from sources
believed to be reliable, but no representation or warranty expressed is made to their accuracy,
completeness or correctness. This document is for information purposes only. The information
contained in this document is published for the assistance of the recipient but is not to be relied upon as
authoritative or taken in substitution for the exercise of judgment by any recipient. This document is not
intended to be a substitute for professional, technical or legal advice. All opinions expressed in this
document are subject to change without notice.
Neither FICCI nor KPMG, nor other legal entities in the group to which it belongs, accept any liability
whatsoever for any direct or consequential loss howsoever arising from any use of this document or its
contents or otherwise arising in connection herewith.
Contents
Executive Summary 1
I INDO-GERMAN BUSINESS OVERVIEW 3
Automotive and Components 7
Defence 9
Education 12
Renewable Energy 14
Financial Services 18
Food, Consumer Goods and Retailing 21
Hardware and Electronics 23
Media and Entertainment 28
Pharmaceuticals 30
Science and Technology 32
SME – SME Cooperation 36
Tourism 38
Transport and Logistics 41
II LOCAL BUSINESS ENVIRONMENT AND 43

Way Forward 51
Disclaimer
The information and opinions contained in this document have been compiled or arrived at from sources
believed to be reliable, but no representation or warranty expressed is made to their accuracy,
completeness or correctness. This document is for information purposes only. The information
contained in this document is published for the assistance of the recipient but is not to be relied upon as
authoritative or taken in substitution for the exercise of judgment by any recipient. This document is not
intended to be a substitute for professional, technical or legal advice. All opinions expressed in this
document are subject to change without notice.
Neither FICCI nor KPMG, nor other legal entities in the group to which it belongs, accept any liability
whatsoever for any direct or consequential loss howsoever arising from any use of this document or its
contents or otherwise arising in connection herewith.
Foreword
With buoyant economic environment, recent track record of over 9 percent

annual growth, strong sectoral performance and growing consumer demand,
India has been making progress at a pace which is unprecedented in its history.
India's conventional image has taken a paradigm shift from being a mere source
of inexpensive labour to a pool of high caliber human capital. Moving beyond the
perception of a services-led economy, India's manufacturing is scaling new
heights in several sectors. The country has been successful on a number of
fronts and leading multinationals today are setting up their R&D centers in India,
thereby, recognizing its true potential.
While the prospect of sectors such as IT, Telecommunications, Healthcare and

Biotechnology have been well recognized, this report also draws attention to the
Indian Media and Entertainment Industry, Financial Services, Travel and Tourism,
Consumer Goods, Auto Components among others, as also the often neglected
sectors such as Logistics, Education, and SMEs which have delivered
tremendous value, but have not been on the forefront.
Both India and Germany have the potential to generate substantial bilateral trade
from lucrative investment affiliations. To achieve this, both countries need to put
in place focused and integrated efforts and initiatives based on strategic
cooperation.
We are confident that this publication will be instrumental in further strengthening

the ties between India and Germany by highlighting the investment attractiveness
and business potential they can generate. Both FICCI and KPMG remain
committed to the concerned stakeholders in deliberating economic and business
partnerships and are confident that the government, private sector and citizens
will benefit greatly from this report.
Dr Amit Mitra Pradeep Udhas

Secretary General Head - Markets
FICCI KPMG in India
Executive Summary
Countries around the world have built great partnerships to create a global
economy. India and Germany are important countries in this increasingly
globalized world. India has achieved an impressive GDP growth of over 8 percent
per annum in the last few years. Germany on the other hand enjoys the status of
being Europe's largest economy.
This report is undertaken to outline a roadmap for India and Germany to make
their economic cooperation most robust and boost trade, investment
opportunities and business in general.
This report covers quite a few critical sectors spanning Auto and auto
components, Defence, Education, Renewable Energy, Financial Services,
Food, Consumer Markets and Retail, Hardware and Electronics, Media and
Entertainment, Pharmaceuticals, Science and Technology, SME, Tourism,
Transport and Logistics. They represent a significant part of each country's
economy.
The sector studies discuss current trends, forecast future ventures, and at the
same time address roadblocks to investment and growth. Both India and
Germany's market economy, presence of a sound political system, legal
framework, skilled and world-class manpower availability and other resources
ensure lasting business opportunities through various avenues.
While expansion of domestic investment is essential, there is immense potential

for FDI increase significantly in both countries by utilizing each others strengths.
This will not only assist in unlocking each country's true potential but also foster
the strategic dimension of bilateral relations between them.
This report also covers synopsis of interviews conducted with German and
Indian industry heads operating cross-border to get an insight into the ease
of doing business in a foreign country. Topics discussed range from
investment regulations, taxes, and expatriate issues to immigration and
labor laws.
Both India and Germany create an array of opportunities for one another, which
remain uncharted. There is great mutuality of benefit in building upon their past
partnership. This study has been undertaken to set the tone for these
deliberations. Its purpose is not only to highlight both the nations' attractiveness
for investment and business through various avenues but also to lay a foundation
for long term affiliation between these two vibrant and promising economies.
This timely thought leadership will further assist in developing the bilateral ties
between India and Germany in the political, cultural, scientific and technological
field, thereby, creating a laissez-faire economy which is in harmony with the new
global economic order.
1
Indo-German Business Overview
Till date, the economic relations between India and Germany have been strategic
India and Germany in nature. Both countries are democracies with a federal-structure and share a
broad range of similar values as well as common views on international issues.
Their ties which have traditionally been close and amicable are predominantly
Two great countries engaging to take characterized by intensive co-operation in the field of economy. Economic
economic relations to a new level relations between these two countries date back to the 16th century. In fact,
between the 16th and 18th century, several German companies were established
A Knowledge Paper to trade with India and other East Asian countries.
India and Germany- An Economic Overview

The Indian Economy: India with its recent 'trillion dollar economy' status has
seen remarkable economic growth over the last couple of years. Last fiscal, India
registered a growth rate of 9.4 percent, making it the second fastest growing
economy after China.
Interplay of economic reforms combined with sound policy regime, favourable

demographics and increased integration with the world economy, have been the
prime drivers of this stupendous economic development.
With positive indicators such as consistent 8-9 percent annual growth, rising
foreign exchange reserves of close to USD 220 billion, a booming capital market,
increasing Foreign Direct Investment (FDI) inflows of USD 15.7 billion in this
fiscal, and more than 30 percent surge in exports, it is not hard to fathom why
India is a leading destination for foreign investment.
The Indian economy is expected to remain strong this year, driven by booming
investment and consumption. The government's eleventh five-year plan (2007-
12) has an ambitious target of 9 percent average annual growth.
The German Economy: As Europe's largest economy and second most

populous nation, Germany is a key member of the continent's economic, political,
and defense organizations.
Germany is also one of the most highly developed industrial nations in the world.
Also, after the U.S. and Japan, Germany has the world's largest national
economy.
After a long period of stagnation, with an average growth rate of 0.7 percent from
2001-05 and chronically high unemployment, heightened growth has led to a
1
considerable fall in unemployment to about 7 percent at the end of 2006 . The
German economy is expected to grow by 2.8 percent in 2007.
1
CIA World Factbook
3
In the near future, domestic demand is expected to make a stronger contribution l Indo-German bi-lateral trade has crossed EUR 10 billion mark in 2006 3
to growth as compared to the recent past, as investment remains stronger and
l Indian imports from Germany has jumped by 52 percent in 2006 4
2
private consumption recovers.
l Indian exports to Germany showed a healthy increase by 22.9 percent in
2006
l Today Germany is India's fourth largest trading partner (after U.S., U.K. and
Composition of India's GDP (2006) Composition of Germany's GDP (2006) Japan)
Industries, Agriculture, Industries, Agriculture,
17.5%
l Germany's trade with India accounts for just over 0.5 percent of Germany's
27.7% 29% 1%
total trade thus there's ample room for much growth
Textiles and leather remain the thrust areas within the composition of Indian
exports to Germany, followed by food items, chemicals, electro technical
Services, Services,
54.8% 70% products, pharmaceuticals and machinery.
Source: Ministry of External Affairs, Govt. of India Source: CIA Important German exports to India are machinery (one third of the share of the
total German exports to India), electro technology as well as plants and metal
products. Also on the list are plastics and plastic products chemicals and
pharmaceuticals, and automobile products and components.
Bilateral Trade
FDI
India and Germany are important partners on the international stage. In recent India is now the most favoured democracy for global investors according to A T
years, the political bilateral relations have intensified considerably. Kearney's authoritative FDI Confidence Index 2005, displacing U.S. from the top
spot. The positive trend in India is indicated through the consistent 8-9 percent
annual growth, rising foreign exchange reserves, a booming capital market and
INDO-GERMAN TRADE
increasing FDI inflows.
2000 2001 2002 2003 2004 2005 2006
Germany is the 7th largest foreign investor in India with cumulative FDI of EUR
(Mill. DM) (Mill.DM) (Mill. EUR) (Mill. EUR) (Mill. EUR) (Mill. EUR) (Mill. EUR)
1.27 billion (Aug 1991-Dec. 2006)3. This is 5 percent of the total FDI inflow into
Indian
India during this period. In 2005, it was the eighth largest investor. In the first
Exports 4747.3 4891.8 2522.3 2636.6 2957.1 3396.5 4175
eleven months of 2006, Germany's approved investment increased substantially
(+14.5) (+3.1) (+0.5) (+4.5) (+12.2) (+14.9) (+22.9) to EUR 296 million (compared to EUR 72 million in 2005 and EUR 160 million in
Indian 2004)5.
Imports 4076.8 4512.2 2420.5 2443.1 3289 4201.8 6365 Some of the prominent and well-integrated Indian companies in Germany are
(+12.8) (+10.7) (+4.6) (+0.9) (+34.6) (+27.7) (+51.5) Kalyani Group (Bharat Forge), TCS, Wipro, Infosys, Dr. Reddy's Laboratories
Total 8824.1 9404 4942.8 5079.7 6246.1 7598.3 10540 Ltd. and Hexaware.
(+13.7) (+6.6) (+2.5) (+2.8) (+23) (+21.6) (+38.7) Germany is also gaining popularity as one of the best markets for investments
not only for its technological prowess but also because of its central geographic
Trade Surplus
location, highly developed infrastructure, stable legal system and well-qualified
for Germany (670.5) (379.6) (101.8) (193.5) 331.9 805.3 2190
workforce. Over 240 Indian companies are registered in Germany.
Source: Federal Statistical Office, Wiesbaden
Germany is the 4th most important destination for Indian investments after the
United States, U.K. and Belgium6.
3
German Consulate in India
4
KPMG Study on Experiences of German companies in India
2 5
EIU - Germany Economic Data Embassy of India in Berlin
6
Indo-German Investments and Collaborations - Annual Review 2006
4 5
In the near future, domestic demand is expected to make a stronger contribution l Indo-German bi-lateral trade has crossed EUR 10 billion mark in 2006 3
to growth as compared to the recent past, as investment remains stronger and
l Indian imports from Germany has jumped by 52 percent in 2006 4
2
private consumption recovers.
l Indian exports to Germany showed a healthy increase by 22.9 percent in
2006
l Today Germany is India's fourth largest trading partner (after U.S., U.K. and
Composition of India's GDP (2006) Composition of Germany's GDP (2006) Japan)
Industries, Agriculture, Industries, Agriculture,
17.5%
l Germany's trade with India accounts for just over 0.5 percent of Germany's
27.7% 29% 1%
total trade thus there's ample room for much growth
Textiles and leather remain the thrust areas within the composition of Indian
exports to Germany, followed by food items, chemicals, electro technical
Services, Services,
54.8% 70% products, pharmaceuticals and machinery.
Source: Ministry of External Affairs, Govt. of India Source: CIA Important German exports to India are machinery (one third of the share of the
total German exports to India), electro technology as well as plants and metal
products. Also on the list are plastics and plastic products chemicals and
pharmaceuticals, and automobile products and components.
Bilateral Trade
FDI
India and Germany are important partners on the international stage. In recent India is now the most favoured democracy for global investors according to A T
years, the political bilateral relations have intensified considerably. Kearney's authoritative FDI Confidence Index 2005, displacing U.S. from the top
spot. The positive trend in India is indicated through the consistent 8-9 percent
annual growth, rising foreign exchange reserves, a booming capital market and
INDO-GERMAN TRADE
increasing FDI inflows.
2000 2001 2002 2003 2004 2005 2006
Germany is the 7th largest foreign investor in India with cumulative FDI of EUR
(Mill. DM) (Mill.DM) (Mill. EUR) (Mill. EUR) (Mill. EUR) (Mill. EUR) (Mill. EUR)
1.27 billion (Aug 1991-Dec. 2006)3. This is 5 percent of the total FDI inflow into
Indian
India during this period. In 2005, it was the eighth largest investor. In the first
Exports 4747.3 4891.8 2522.3 2636.6 2957.1 3396.5 4175
eleven months of 2006, Germany's approved investment increased substantially
(+14.5) (+3.1) (+0.5) (+4.5) (+12.2) (+14.9) (+22.9) to EUR 296 million (compared to EUR 72 million in 2005 and EUR 160 million in
Indian 2004)5.
Imports 4076.8 4512.2 2420.5 2443.1 3289 4201.8 6365 Some of the prominent and well-integrated Indian companies in Germany are
(+12.8) (+10.7) (+4.6) (+0.9) (+34.6) (+27.7) (+51.5) Kalyani Group (Bharat Forge), TCS, Wipro, Infosys, Dr. Reddy's Laboratories
Total 8824.1 9404 4942.8 5079.7 6246.1 7598.3 10540 Ltd. and Hexaware.
(+13.7) (+6.6) (+2.5) (+2.8) (+23) (+21.6) (+38.7) Germany is also gaining popularity as one of the best markets for investments
not only for its technological prowess but also because of its central geographic
Trade Surplus
location, highly developed infrastructure, stable legal system and well-qualified
for Germany (670.5) (379.6) (101.8) (193.5) 331.9 805.3 2190
workforce. Over 240 Indian companies are registered in Germany.
Source: Federal Statistical Office, Wiesbaden
Germany is the 4th most important destination for Indian investments after the
United States, U.K. and Belgium6.
3
German Consulate in India
4
KPMG Study on Experiences of German companies in India
2 5
EIU - Germany Economic Data Embassy of India in Berlin
6
Indo-German Investments and Collaborations - Annual Review 2006
4 5
German companies with eminent presence in India include BMW,
DaimlerChrysler, Bayer, Siemens, BASF, Robert Bosch, SAP and Thyssen Krupp
Automotive and components
Indian Auto Market
7 8
Primary reasons for doing business with India: Primary reasons for doing business with Germany: The Indian auto sector is making large strides in recent times. Both automobile
l Largest economy in Europe with a 22 percent and auto components segments have been growing rapidly, largely driven by the
l One of the largest economies in the world with
share of Eurozone GDP and access to 454 million
robust and sustainable Gross Domestic Product consumers. Productivity has risen by more than 30 healthy growth of the Indian economy, coupled with rise in personal disposable
(GDP) and FDI growth percent in the past five years.
incomes and easy availability of finance offered by various auto companies.
l World's second largest exporter - 'Made in
l Skilled manpower availability at competitive Strong infrastructure growth and positive outlook of the freight transportation
Germany' is a seal of quality recognized around the
costs world. industry in India have been key drivers for growth of commercial vehicle market
l Rich base of mineral and agricultural resources l Located in the heart of Europe and shares borders in India. India is also becoming a favored sourcing destination for auto-
with every major economy in central Europe,
and other raw materials thereby reducing the
providing instant access to both established
components and has emerged as an outsourcing hub for auto parts for
cost of inputs markets in Western Europe and emerging markets international companies such as Ford, General Motors, DaimlerChrysler, Fiat,
in Central and Eastern Europe.
l Sophisticated financial sector Volkswagen, and Toyota.
l Highly sophisticated infrastructure; motorways,
railroads and a state-of-the-art telecommunications India is also becoming a hotspot for offshoring of automotive design and
l Government's proven commitment to the
network ensure that goods and IT-services are
deregulation process delivered quickly and dependably. engineering services. Offshore Indian vendors can be classified into four groups
l Well balanced package of fiscal incentives l Most innovative nation in Europe, (more than 20 a) Captives like GM, Delphi, Ford, b) Subsidiaries of Indian auto Original
percent of European patents are held by Germans).
Equipment Manufacturers (OEM) like Mahindra, Hero, Eicher c) Independent
l Strategic location - access to the vast domestic
l International capital market, a liberal and stable engineering design firms such as Plexion, DC Design, Neilsoft and d) Indian
and South Asian market social market and financial services are its distinct
10
advantages. Information Technology (IT) services firms like TCS, Wipro, Infosys .
l English is widely spoken and understood
l Over 22,000 foreign companies operate in
Germany, employing in excess of 2.1 million staff, Automobile (units) Domestic Sales Trends Automobile (units) Export Sales Trends
l Growing consumerism, with increasing affluent
generating trillions of euros in turnover.
and growing middle class 12000000 1200000
l The WEF ranks Germany 3rd in its Business 10109037
1011278
CAGR 14 % 1000000
10000000
Competitiveness Index. 8906428 CAGR 41 % 806222
7897629
8000000 800000
No. of Vehicles
No. of Vehicles
6810537 629544
5941535
6000000 5225788 600000 479919
4000000 400000 307308

184680
Business Treaties 2000000 200000
0 0
9 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
The main Indo-German economic agreements include:
Source: SIAM Source: SIAM
l Trade Agreement of 31 March 1955
l Exchange of Notes on the protection of German investments in India on 15

The availability of high-skilled manpower coupled with a well developed and
October 1964
globally competitive auto component sector and proximity to Asian markets, has
l Agreements on cooperation in scientific research and technological made India an attractive destination for creating a strong sourcing base. India is
development of 1971 and 1974 also emerging as one of the key auto components center in Asia and is expected
l Agreement for the Avoidance of Double Taxation, which came into force on to play a significant role in the global automotive supply chain in the near future.
19 December 1996
German Auto Market
l Agreement for the Promotion and Protection of Investments, which came into
Germany is the largest automotive manufacturer in Europe and third largest
force in July 1998
automotive manufacturer globally, after the U.S. and Japan. It is also the largest
maker of automotive components, accounting for 51 percent of the European
7
MapsofIndia.com Union (EU) OEM market and 25 percent of the aftermarket.
8
CIA World Factbook
9
German Consulate General Chennai website
Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
10
years and current exchange rate for projections Business Wire, July, 13, 2006
6 7
German companies with eminent presence in India include BMW,
DaimlerChrysler, Bayer, Siemens, BASF, Robert Bosch, SAP and Thyssen Krupp
Automotive and components
Indian Auto Market
7 8
Primary reasons for doing business with India: Primary reasons for doing business with Germany: The Indian auto sector is making large strides in recent times. Both automobile
l Largest economy in Europe with a 22 percent and auto components segments have been growing rapidly, largely driven by the
l One of the largest economies in the world with
share of Eurozone GDP and access to 454 million
robust and sustainable Gross Domestic Product consumers. Productivity has risen by more than 30 healthy growth of the Indian economy, coupled with rise in personal disposable
(GDP) and FDI growth percent in the past five years.
incomes and easy availability of finance offered by various auto companies.
l World's second largest exporter - 'Made in
l Skilled manpower availability at competitive Strong infrastructure growth and positive outlook of the freight transportation
Germany' is a seal of quality recognized around the
costs world. industry in India have been key drivers for growth of commercial vehicle market
l Rich base of mineral and agricultural resources l Located in the heart of Europe and shares borders in India. India is also becoming a favored sourcing destination for auto-
with every major economy in central Europe,
and other raw materials thereby reducing the
providing instant access to both established
components and has emerged as an outsourcing hub for auto parts for
cost of inputs markets in Western Europe and emerging markets international companies such as Ford, General Motors, DaimlerChrysler, Fiat,
in Central and Eastern Europe.
l Sophisticated financial sector Volkswagen, and Toyota.
l Highly sophisticated infrastructure; motorways,
railroads and a state-of-the-art telecommunications India is also becoming a hotspot for offshoring of automotive design and
l Government's proven commitment to the
network ensure that goods and IT-services are
deregulation process delivered quickly and dependably. engineering services. Offshore Indian vendors can be classified into four groups
l Well balanced package of fiscal incentives l Most innovative nation in Europe, (more than 20 a) Captives like GM, Delphi, Ford, b) Subsidiaries of Indian auto Original
percent of European patents are held by Germans).
Equipment Manufacturers (OEM) like Mahindra, Hero, Eicher c) Independent
l Strategic location - access to the vast domestic
l International capital market, a liberal and stable engineering design firms such as Plexion, DC Design, Neilsoft and d) Indian
and South Asian market social market and financial services are its distinct
10
advantages. Information Technology (IT) services firms like TCS, Wipro, Infosys .
l English is widely spoken and understood
l Over 22,000 foreign companies operate in
Germany, employing in excess of 2.1 million staff, Automobile (units) Domestic Sales Trends Automobile (units) Export Sales Trends
l Growing consumerism, with increasing affluent
generating trillions of euros in turnover.
and growing middle class 12000000 1200000
l The WEF ranks Germany 3rd in its Business 10109037
1011278
CAGR 14 % 1000000
10000000
Competitiveness Index. 8906428 CAGR 41 % 806222
7897629
8000000 800000
No. of Vehicles
No. of Vehicles
6810537 629544
5941535
6000000 5225788 600000 479919
4000000 400000 307308

184680
Business Treaties 2000000 200000
0 0
9 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
The main Indo-German economic agreements include:
Source: SIAM Source: SIAM
l Trade Agreement of 31 March 1955
l Exchange of Notes on the protection of German investments in India on 15

The availability of high-skilled manpower coupled with a well developed and
October 1964
globally competitive auto component sector and proximity to Asian markets, has
l Agreements on cooperation in scientific research and technological made India an attractive destination for creating a strong sourcing base. India is
development of 1971 and 1974 also emerging as one of the key auto components center in Asia and is expected
l Agreement for the Avoidance of Double Taxation, which came into force on to play a significant role in the global automotive supply chain in the near future.
19 December 1996
German Auto Market
l Agreement for the Promotion and Protection of Investments, which came into
Germany is the largest automotive manufacturer in Europe and third largest
force in July 1998
automotive manufacturer globally, after the U.S. and Japan. It is also the largest
maker of automotive components, accounting for 51 percent of the European
7
MapsofIndia.com Union (EU) OEM market and 25 percent of the aftermarket.
8
CIA World Factbook
9
German Consulate General Chennai website
10
years and current exchange rate for projections Business Wire, July, 13, 2006
6 7
Germany: Leader in passenger car production in Europe
Defence
Overview
Number of passenger car production
plants in Europe - by country With a defense policy largely oriented towards self-defence, India is the world's
tenth biggest defence spender and third largest importer of defence hardware.
India has ushered in phased liberalization into the defence industry realizing the
enormous potential that domestic production could bring in through synergies
and linkages. One such major step came through the newly reformed Defence
Total No of Plants in Europe : 126

Procurement Procedure (DPP), which introduced Offsets for capital purchases in
excess of EUR 52.3 million made from foreign supplier. For the first time, the new
'MAKE' procedure in DPP 2006 has been formulated for capital acquisition. This
is a major policy change by the government for encouraging indigenous
manufacture of defence equipment by Indian industry. This procedure intends to
encourage greater participation of the private sector in defence production,
thereby levering the country's position as a large buyer and exporter. German
companies can collaborate with their Indian counterparts in areas of technology,
Research and Development (R&D) and manufacturing and services. This way
they can cater not only to the high potential Indian market but also to
Source: Invest in Germany neighboring economies.
India's defence spend over the years has been in the range of 2.5 percent of its
GDP and has recorded a Compounded Annual Growth Rate (CAGR) of 6 percent
Germany has a strong base for innovation and has over 32 innovation clusters in
since 2004-0512. The defence budget for 2007-08 has an outlay of around EUR
the automotive industry including mechatronics, microelectronics, power
7.3 billion towards capital expenditure in terms of buying new weapons, systems
electronics, telematics, environmental technologies, manufacturing processes
and equipment; while, a amount of EUR 9.4 billion will be reserved for revenue
and technologies. Germany's excellent research, technology infrastructure and
expenditure, which is mainly incurred for buying of spares, general stores, fuel,
access to European market, offers large opportunities for global automotive and
11 clothing, food and medical stores etc13. The Indian defence budget is expected to
auto component player to venture into Germany .
grow 7 percent annually over the next five years starting from 2006-0714. Key
Opportunities for India and Germany areas of growth identified within the industry are expected to arise from-
Innovation and technology up-gradation are key drivers for success in today's l Up-gradation of the production capacity
highly competitive automotive market. Hence there lies an immense opportunity l Technology transfer
for Indian and German car makers to collaborate and leverage each others' l Modernization of defense infrastructure
strengths in areas of technology, cost effective production techniques, huge
Indian Defence Spend
potential market etc. German companies can also look at making India a base to
2007-08* 8 3 5 1
source auto components, catering to emerging Asian markets. Similarly, Indian
Army
auto majors can partner with their German counterparts to take advantage of 2006-07 7 3 4 1
Navy
Germany's technological prowess, to cater to the vast European market. 2005-06 7 2 4 1
Air Force
2004-05 6 2 4 1
Others
0 5 10 15 20
Euro Billion
Source: Ministry of Defence, Government of India
12
Ministry of Defence
13
11
IDSA March 09, 2007
Invest in Germany – Industry Overview Automotive 14
Indo Asian News Service
8 9
Germany: Leader in passenger car production in Europe
Defence
Overview
Number of passenger car production
plants in Europe - by country With a defense policy largely oriented towards self-defence, India is the world's
tenth biggest defence spender and third largest importer of defence hardware.
India has ushered in phased liberalization into the defence industry realizing the
enormous potential that domestic production could bring in through synergies
and linkages. One such major step came through the newly reformed Defence
Total No of Plants in Europe : 126

Procurement Procedure (DPP), which introduced Offsets for capital purchases in
excess of EUR 52.3 million made from foreign supplier. For the first time, the new
'MAKE' procedure in DPP 2006 has been formulated for capital acquisition. This
is a major policy change by the government for encouraging indigenous
manufacture of defence equipment by Indian industry. This procedure intends to
encourage greater participation of the private sector in defence production,
thereby levering the country's position as a large buyer and exporter. German
companies can collaborate with their Indian counterparts in areas of technology,
Research and Development (R&D) and manufacturing and services. This way
they can cater not only to the high potential Indian market but also to
Source: Invest in Germany neighboring economies.
India's defence spend over the years has been in the range of 2.5 percent of its
GDP and has recorded a Compounded Annual Growth Rate (CAGR) of 6 percent
Germany has a strong base for innovation and has over 32 innovation clusters in
since 2004-0512. The defence budget for 2007-08 has an outlay of around EUR
the automotive industry including mechatronics, microelectronics, power
7.3 billion towards capital expenditure in terms of buying new weapons, systems
electronics, telematics, environmental technologies, manufacturing processes
and equipment; while, a amount of EUR 9.4 billion will be reserved for revenue
and technologies. Germany's excellent research, technology infrastructure and
expenditure, which is mainly incurred for buying of spares, general stores, fuel,
access to European market, offers large opportunities for global automotive and
11 clothing, food and medical stores etc13. The Indian defence budget is expected to
auto component player to venture into Germany .
grow 7 percent annually over the next five years starting from 2006-0714. Key
Opportunities for India and Germany areas of growth identified within the industry are expected to arise from-
Innovation and technology up-gradation are key drivers for success in today's l Up-gradation of the production capacity
highly competitive automotive market. Hence there lies an immense opportunity l Technology transfer
for Indian and German car makers to collaborate and leverage each others' l Modernization of defense infrastructure
strengths in areas of technology, cost effective production techniques, huge
Indian Defence Spend
potential market etc. German companies can also look at making India a base to
2007-08* 8 3 5 1
source auto components, catering to emerging Asian markets. Similarly, Indian
Army
auto majors can partner with their German counterparts to take advantage of 2006-07 7 3 4 1
Navy
Germany's technological prowess, to cater to the vast European market. 2005-06 7 2 4 1
Air Force
2004-05 6 2 4 1
Others
0 5 10 15 20
Euro Billion
Source: Ministry of Defence, Government of India
12
Ministry of Defence
13
11
IDSA March 09, 2007
Invest in Germany – Industry Overview Automotive 14
Indo Asian News Service
8 9
The Indian defence space is gradually liberalizing and the public sector is Against this backdrop, EADS opening up an aerospace technology centre in
facilitating greater private sector participation in the area of defence goods India is certainly a partnership booster which would benefit both sides.
production. There are about 5,100 companies supplying around 20 to 25 percent
India's Defence Future Plans
of components and subassemblies to state-owned contractors15.
Navy Plans to acquire 27 new ships in five years and another 32 ships
Opportunities
in 10-15 years. It is also estimated that the Indian Navy has a
There is growing impetus in India to match rising requirement for defence requirement of a force of 24 new submarines by 2030.
equipment with superior technology at the best prices. With nearly 30 percent of
Air Force Set to purchase 126 multi-role fighters for the Indian Air Force at
India's defence procurements being sourced through imports, German
a cost of EUR 4.75 billion
companies can capitalize on this opportunity, as German companies are highly
Thus, the Indian defence industry presents enormous opportunities for countries
respected for quality and innovation in India16. Orders worth around EUR 219
possessing high technical capabilities in areas of defence. The reflection of the
million for equipment are estimated to have already been placed with German
same was the huge international participation at Aero India 2007. More than 50
companies17.
countries were represented at the event.
The current aerospace defence market for private sector, which includes
outsourcing from Defence Public Sector Units and Ordinance Factories, is
estimated to be EUR 511 million. This presents a well matched opportunity for
German companies given their proven expertise in the area of aero defence.
The Indian Navy currently deploys 16 submarines and has ambitious plans to
build 24 such vessels to meet challenges across the Indian Ocean. The project
cost is estimated at around EUR 10.2-11.7 billion. In this respect, Indian
companies are willing to partner with foreign players for licensed production of
submarines in India18.
German major EADS plans to invest EUR 2 billion in India over the next 15
years. In 2006, EADS signed a Memorandum of Understanding (MoU) with
Hindustan Aeronautics Limited (HAL) to further expand their cooperation into new
market segments. EADS has already supplied India's military with air-to-air
missiles, anti-tank missiles and helicopters. EADS is also developing satellites
with the Indian Space Research Organization (ISRO). EADS, through Airbus, has
already grabbed a large share of the fast-growing aviation market, as Airbus sold
more than 229 passenger planes to Indian companies. Airbus holds almost three-
fourths of all Indian firms' future orders and options for passenger planes,
according to company officials. The value of those orders and options will total
EUR 16 billion in 2006, EADS estimates.
Hindustan Aeronautics Limited (HAL) has gone on to produce, the Advanced

Light Helicopter with technical assistance from Messerschmitt Bvlkow-Blohm.
Again, Liebherr Aerospace, a well-known German aerospace supplier, also
cooperates with HAL on the Indian Do-228 aircraft programme. Since 1988, HAL
started to produce doors for the A-320, Airbus's best-selling aircraft in the
international markets.
15
Frost and Sullivan
16
Frost and Sullivan
17
Indian Embassy in Germany Website Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
18
Hindustan Times Jul 22, 2007 years and current exchange rate for projections
10 11
The Indian defence space is gradually liberalizing and the public sector is Against this backdrop, EADS opening up an aerospace technology centre in
facilitating greater private sector participation in the area of defence goods India is certainly a partnership booster which would benefit both sides.
production. There are about 5,100 companies supplying around 20 to 25 percent
India's Defence Future Plans
of components and subassemblies to state-owned contractors15.
Navy Plans to acquire 27 new ships in five years and another 32 ships
Opportunities
in 10-15 years. It is also estimated that the Indian Navy has a
There is growing impetus in India to match rising requirement for defence requirement of a force of 24 new submarines by 2030.
equipment with superior technology at the best prices. With nearly 30 percent of
Air Force Set to purchase 126 multi-role fighters for the Indian Air Force at
India's defence procurements being sourced through imports, German
a cost of EUR 4.75 billion
companies can capitalize on this opportunity, as German companies are highly
Thus, the Indian defence industry presents enormous opportunities for countries
respected for quality and innovation in India16. Orders worth around EUR 219
possessing high technical capabilities in areas of defence. The reflection of the
million for equipment are estimated to have already been placed with German
same was the huge international participation at Aero India 2007. More than 50
companies17.
countries were represented at the event.
The current aerospace defence market for private sector, which includes
outsourcing from Defence Public Sector Units and Ordinance Factories, is
estimated to be EUR 511 million. This presents a well matched opportunity for
German companies given their proven expertise in the area of aero defence.
The Indian Navy currently deploys 16 submarines and has ambitious plans to
build 24 such vessels to meet challenges across the Indian Ocean. The project
cost is estimated at around EUR 10.2-11.7 billion. In this respect, Indian
companies are willing to partner with foreign players for licensed production of
submarines in India18.
German major EADS plans to invest EUR 2 billion in India over the next 15
years. In 2006, EADS signed a Memorandum of Understanding (MoU) with
Hindustan Aeronautics Limited (HAL) to further expand their cooperation into new
market segments. EADS has already supplied India's military with air-to-air
missiles, anti-tank missiles and helicopters. EADS is also developing satellites
with the Indian Space Research Organization (ISRO). EADS, through Airbus, has
already grabbed a large share of the fast-growing aviation market, as Airbus sold
more than 229 passenger planes to Indian companies. Airbus holds almost three-
fourths of all Indian firms' future orders and options for passenger planes,
according to company officials. The value of those orders and options will total
EUR 16 billion in 2006, EADS estimates.
Hindustan Aeronautics Limited (HAL) has gone on to produce, the Advanced

Light Helicopter with technical assistance from Messerschmitt Bvlkow-Blohm.
Again, Liebherr Aerospace, a well-known German aerospace supplier, also
cooperates with HAL on the Indian Do-228 aircraft programme. Since 1988, HAL
started to produce doors for the A-320, Airbus's best-selling aircraft in the
international markets.
15
Frost and Sullivan
16
Frost and Sullivan
17
Indian Embassy in Germany Website Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
18
Hindustan Times Jul 22, 2007 years and current exchange rate for projections
10 11
Education System in Germany
Education
The educational system in Germany follows the European model of free public
Education System in India education. Around 5.33 percent of the GDP is spent by the country on education
in 2006-07.
India has made large strides with regards to educating its population of more
than a billion people. Literacy rates have increased from 52.2 percent in 1991 to Germany’s professional training, universities and research and development rank
65.2 percent in 2001. In terms of physical access to schools, more than 90 high in international comparison. Its education system focuses on quality
percent of the Indian population now has a primary school located within 1 development and assurance in all academic areas. The universities in Germany
kilometer of their place of residence. are recognized internationally, indicating the high education standards in the
country. In the 2006 THES - QS World University Rankings*, 10 German
Public expenditure on education in India has been rising over time. Combined
universities were ranked amongst the top 200 in the world.
government expenditure on education (states and federal) has increased at a
CAGR of 11.6 percent over the past six years to EUR 20.4 billion in FY 2006/0719. Germany is one of the most preferred countries for educational opportunities, by
India's Expenditure on Education foreign students. Foreign students represent 10.1 percent of the total student
25 3.1% population, making Germany significantly more attractive than other top host
3.0% 20.4
20
19.1 3.0% countries such as the U.S., where only 3.7 percent of students are foreigners.
3.0%
16.2 15.2
15.2 14.3 2.9%
15
2.8% 2.9% 2.9% 2.8%
10 2.7%
Opportunities for India and Germany
2.7%
5 2.6% Rapidly increasing numbers of students in foreign countries have boosted
0 2.5%
2001-02 2002-03 2003-04 2004-05 2005-06 RE 2006-07 BE international mobility, resulting in 2.7 million students studying abroad every year.
The main countries of origin for foreign students are China, India and South
Euro Billion % of GDP
Korea. Developed countries like Germany, U.S. and the U.K. are the destination
Source: Indian Budget 2007-08
of these mobility movements.
Under the National Common Minimum Programme, (NCMP), the Government of
While large share of Chinese attend German institutions of higher education,
India (GOI) has committed to increase public expenditure on education to 6
Germany has a substantially smaller market share of the global mobility
percent of GDP and universalize the elementary education20. At the international
generated by India, which has risen to become the world’s second most important
level, India is committed to the 'Millennium Development Goals' and 'Education
country of origin. While 66,000 of the nearly 90,000 Indian students worldwide
for All'. Also, several positive steps have been taken towards exploring the
went to study in the U.S. in 2002, Germany was able to attract only about 2,000.
potential of technologies at all levels of education. These investments and
initiatives have come from government, private sectors and well as civil society The Dual System of Education, a practice-oriented method in Germany wherein
organizations. One of such initiative is ICT@ schools, a centrally sponsored the theory imparted in a classroom is complimented by a hands-on experience at
scheme for providing assistance to State Governments in promoting computer the workplace is fast gaining importance and creating an impact globally. At
education and computer aided education in secondary and higher secondary present, the Indo-German Training Centre (IGTC) is the only training center in
schools. India, to deliver quality learning and practical training based on this system. More
Germany: Annual expenditure per student 2006 (figures in Euro) of such initiatives by various German institutes will benefit Indian students and
corporates alike.
Tertiary 8,767
Education is set to emerge as an attractive investment theme in India, with the
population’s median age below 25 years, and with a perceptible shift in mass
Secondary 5,599
mindset towards spending for education. Such complementarities between India
and Germany open up vast opportunities for educational cooperation, especially
Primary 3,616 in field of higher education.
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
Source: OECD * Annual publication of university rankings around the world, published by The Times
Higher Education Supplement (THES) and Quacquarelli Symonds (QS)
19
Budget Estimate 2007-08 Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
20
Economic Survey 2006–07 years and current exchange rate for projections
12 13
Education System in Germany
Education
The educational system in Germany follows the European model of free public
Education System in India education. Around 5.33 percent of the GDP is spent by the country on education
in 2006-07.
India has made large strides with regards to educating its population of more
than a billion people. Literacy rates have increased from 52.2 percent in 1991 to Germany’s professional training, universities and research and development rank
65.2 percent in 2001. In terms of physical access to schools, more than 90 high in international comparison. Its education system focuses on quality
percent of the Indian population now has a primary school located within 1 development and assurance in all academic areas. The universities in Germany
kilometer of their place of residence. are recognized internationally, indicating the high education standards in the
country. In the 2006 THES - QS World University Rankings*, 10 German
Public expenditure on education in India has been rising over time. Combined
universities were ranked amongst the top 200 in the world.
government expenditure on education (states and federal) has increased at a
CAGR of 11.6 percent over the past six years to EUR 20.4 billion in FY 2006/0719. Germany is one of the most preferred countries for educational opportunities, by
India's Expenditure on Education foreign students. Foreign students represent 10.1 percent of the total student
25 3.1% population, making Germany significantly more attractive than other top host
3.0% 20.4
20
19.1 3.0% countries such as the U.S., where only 3.7 percent of students are foreigners.
3.0%
16.2 15.2
15.2 14.3 2.9%
15
2.8% 2.9% 2.9% 2.8%
10 2.7%
Opportunities for India and Germany
2.7%
5 2.6% Rapidly increasing numbers of students in foreign countries have boosted
0 2.5%
2001-02 2002-03 2003-04 2004-05 2005-06 RE 2006-07 BE international mobility, resulting in 2.7 million students studying abroad every year.
The main countries of origin for foreign students are China, India and South
Euro Billion % of GDP
Korea. Developed countries like Germany, U.S. and the U.K. are the destination
Source: Indian Budget 2007-08
of these mobility movements.
Under the National Common Minimum Programme, (NCMP), the Government of
While large share of Chinese attend German institutions of higher education,
India (GOI) has committed to increase public expenditure on education to 6
Germany has a substantially smaller market share of the global mobility
percent of GDP and universalize the elementary education20. At the international
generated by India, which has risen to become the world’s second most important
level, India is committed to the 'Millennium Development Goals' and 'Education
country of origin. While 66,000 of the nearly 90,000 Indian students worldwide
for All'. Also, several positive steps have been taken towards exploring the
went to study in the U.S. in 2002, Germany was able to attract only about 2,000.
potential of technologies at all levels of education. These investments and
initiatives have come from government, private sectors and well as civil society The Dual System of Education, a practice-oriented method in Germany wherein
organizations. One of such initiative is ICT@ schools, a centrally sponsored the theory imparted in a classroom is complimented by a hands-on experience at
scheme for providing assistance to State Governments in promoting computer the workplace is fast gaining importance and creating an impact globally. At
education and computer aided education in secondary and higher secondary present, the Indo-German Training Centre (IGTC) is the only training center in
schools. India, to deliver quality learning and practical training based on this system. More
Germany: Annual expenditure per student 2006 (figures in Euro) of such initiatives by various German institutes will benefit Indian students and
corporates alike.
Tertiary 8,767
Education is set to emerge as an attractive investment theme in India, with the
population’s median age below 25 years, and with a perceptible shift in mass
Secondary 5,599
mindset towards spending for education. Such complementarities between India
and Germany open up vast opportunities for educational cooperation, especially
Primary 3,616 in field of higher education.
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
Source: OECD * Annual publication of university rankings around the world, published by The Times
Higher Education Supplement (THES) and Quacquarelli Symonds (QS)
19
Budget Estimate 2007-08 Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
20
Economic Survey 2006–07 years and current exchange rate for projections
12 13
Renewable Energy Indian Progress Report (Renewables)
Year (as of) Potential* Cumulative Generated Distributed

Overview
January 2007 847,766 9372.95 124.10
Commercial primary energy consumption in India has grown by about 700
December 2006 172,000 7088.10 80.90
percent in the last four decades. The existing per capita commercial primary
energy consumption in India is about 350 kgoe/ year which is well below that of December 2005 81,200 5699.50 N.A.
developed countries. Driven by the rising population, expanding economy and a
March 2004 81,200 4949.50 N.A.
quest for improved quality of life, energy usage in India is expected to rise to
December 2003 82,000 3818.00 N.A.
around 450 kgoe/ year in 201021.
All figures in MW; * Figures are estimates
With a targeted GDP growth rate of 7 to 8 percent, and an estimated energy
Source: Business World
elasticity of 0.80, the energy requirement of India is expected to grow at 5.6- 6.4
percent per annum over the next few years. This implies a four-fold increase in Opportunities - Renewable Energy
India’s energy requirement over the next 25 years
India has the largest government initiated programmes in renewable energy in
the world. In addition to this, GOI plans to provide electricity to around 75 million
India’s composition of energy sources and uses
rural un-electrified households in the next five years. Additionally, the Ministry of
Energy Sources Energy Usage
Natural Gas-
New and Renewable Energy is planning new incentive schemes to attract private
Non Power
5% investment of at least EUR 10.9 billion over next five years. The new incentives,
Oil-Non Power
Oil
36%
33% which include long-term tax breaks and provision for green certificate, will come
in place of the existing incentive of allowing 80 percent depreciation on
Coal
51% Electricity equipment installed for generating green power in the first year.
46%
Wind Energy
Coal-Non
Gas
9% HydroNuclear
Power India began wind development in Installed Capacity-Wind Power (Mw)
2% 16%
2% the 1990s, and development has
6000
5340
Source: Planning Commission of India, 2006 only begun to take off in the last
5000
few years. Although a relative

Renewable Energy 4000
newcomer to the wind industry 3595
The importance of the increasing role of Renewable Energy Break-up compared to Denmark or the U.S.,
3000
Xith Plan (2007-12) 2483

renewable energy sources in the overall a combination of domestic policy 2000
1870
Cogeneration 1628
energy scenario in India was 21% support for wind power and the 1167
1340
1000
recognized in the early 1970s. The rise of a leading global wind
Indian Renewable Energy (RE) industry turbine manufacturer have led 0
Wind Energy 2000 2001 2002 2003 2004 2005 2006
is diversified and offers strong business 58% Hyde
India to become the country with
21% Source: Vestas RRB
prospects. The renewable energy the 4th largest installed wind
sector in the country saw a 25 percent Planned Capacity Addition: 12,000 MW power capacity in the world, and the wind energy leader in the developing world.
growth in the last Plan period (Xth Plan) Source: The Hindu Business Line
as against a target of 10 percent. Encouraged by the progress, the Central
Solar Energy
government is now targeting a 12,000 MW22 power capacity addition from
renewable energy during the XIth Plan period. The solar radiation falling over India is about 5,000 trillion kWh / year. There are
about 300 clear sunny days in a year in most parts of the country. The average
insolation incident over India is about 5.5 kWh / sq. meters over a horizontal
surface.
21
Ministry of New and Renewable Energy, Government of India (MNES)
22
The Hindu Business Line
14 15
Renewable Energy Indian Progress Report (Renewables)
Year (as of) Potential* Cumulative Generated Distributed

Overview
January 2007 847,766 9372.95 124.10
Commercial primary energy consumption in India has grown by about 700
December 2006 172,000 7088.10 80.90
percent in the last four decades. The existing per capita commercial primary
energy consumption in India is about 350 kgoe/ year which is well below that of December 2005 81,200 5699.50 N.A.
developed countries. Driven by the rising population, expanding economy and a
March 2004 81,200 4949.50 N.A.
quest for improved quality of life, energy usage in India is expected to rise to
December 2003 82,000 3818.00 N.A.
around 450 kgoe/ year in 201021.
All figures in MW; * Figures are estimates
With a targeted GDP growth rate of 7 to 8 percent, and an estimated energy
Source: Business World
elasticity of 0.80, the energy requirement of India is expected to grow at 5.6- 6.4
percent per annum over the next few years. This implies a four-fold increase in Opportunities - Renewable Energy
India’s energy requirement over the next 25 years
India has the largest government initiated programmes in renewable energy in
the world. In addition to this, GOI plans to provide electricity to around 75 million
India’s composition of energy sources and uses
rural un-electrified households in the next five years. Additionally, the Ministry of
Energy Sources Energy Usage
Natural Gas-
New and Renewable Energy is planning new incentive schemes to attract private
Non Power
5% investment of at least EUR 10.9 billion over next five years. The new incentives,
Oil-Non Power
Oil
36%
33% which include long-term tax breaks and provision for green certificate, will come
in place of the existing incentive of allowing 80 percent depreciation on
Coal
51% Electricity equipment installed for generating green power in the first year.
46%
Wind Energy
Coal-Non
Gas
9% HydroNuclear
Power India began wind development in Installed Capacity-Wind Power (Mw)
2% 16%
2% the 1990s, and development has
6000
5340
Source: Planning Commission of India, 2006 only begun to take off in the last
5000
few years. Although a relative

Renewable Energy 4000
newcomer to the wind industry 3595
The importance of the increasing role of Renewable Energy Break-up compared to Denmark or the U.S.,
3000
Xith Plan (2007-12) 2483

renewable energy sources in the overall a combination of domestic policy 2000
1870
Cogeneration 1628
energy scenario in India was 21% support for wind power and the 1167
1340
1000
recognized in the early 1970s. The rise of a leading global wind
Indian Renewable Energy (RE) industry turbine manufacturer have led 0
Wind Energy 2000 2001 2002 2003 2004 2005 2006
is diversified and offers strong business 58% Hyde
India to become the country with
21% Source: Vestas RRB
prospects. The renewable energy the 4th largest installed wind
sector in the country saw a 25 percent Planned Capacity Addition: 12,000 MW power capacity in the world, and the wind energy leader in the developing world.
growth in the last Plan period (Xth Plan) Source: The Hindu Business Line
as against a target of 10 percent. Encouraged by the progress, the Central
Solar Energy
government is now targeting a 12,000 MW22 power capacity addition from
renewable energy during the XIth Plan period. The solar radiation falling over India is about 5,000 trillion kWh / year. There are
about 300 clear sunny days in a year in most parts of the country. The average
insolation incident over India is about 5.5 kWh / sq. meters over a horizontal
surface.
21
Ministry of New and Renewable Energy, Government of India (MNES)
22
The Hindu Business Line
14 15
Cumulative achievements in Solar Energy Space as on 31-01-2007 Small Hydro Power
Distributed Solar Power 2.92 MW Small and mini hydel projects have the potential to provide energy in remote and
hilly areas where extension of the grid system is un-economical. Realizing this
Solar Street Lightning System 54659 Nos.
fact, Government of India is encouraging the development of small and mini
Home Lightning System 301603 Nos. hydro power projects in the country. India has 420 small hydro power projects of
Solar Lantern 463058 Nos. up to 25 MW station capacity with an aggregate capacity of over 1423 MW.
Further, over 187 projects in this range with aggregate capacity of 521 MW are
Solar Power Plants 1859.8 kWp
under construction.
Solar Water Heating Systems 1.66 million sq. m. collector area
An estimated potential of about 15,000 MW of small hydro power projects exist in
Solar Cookers 6.03 lakh India. Ministry of New and Renewable Energy has created a database of 4096
Solar Photovoltaic Pumps 7068 Nos. potential sites with an aggregate capacity of 10,071 MW for projects with upto 25
MW capacity.
Source: MNES Website
Hydrogen Power
Business Case
Hydrogen is a clean fuel and an efficient energy storage medium for various
Tata BP Solar a Joint Venture (JV) between Tata Power Company and BP applications. The Ministry of Non-Conventional Energy Sources (MNES) is
Solar, one of the largest solar companies in the world uses state-of-the-art implementing various research, development and demonstration projects in
technology to offer high-quality, innovative solar solutions that cater to the hydrogen energy including the production, storage and utilization of hydrogen for
needs of individual customers, large institutions as well as entire communities.
stationary/portable and vehicle applications24.
Tata BP Solar has the distinction of being the only Indian solar company to
Conclusion
regularly export its products and systems to dozens of countries across five
continents. More than 60 percent of its sales come from exports, with more India can adopt the German model for the development of renewable energy.
than 95 percent of the exports going to Europe and America. The main reason for the growth of renewable energy in Germany could be
attributed to Renewable Energy Law, which has created a 'fixed feed-in' tariff
Biomass and Cogeneration system. This system guarantees minimum prices to renewable energy suppliers
and obligates grid operators to accept the energy onto their grids. This increases
At present, biomass contributes 14 percent of the total energy supply worldwide
the availability of green energy in the market On the distribution network the
and 38 percent of this energy is consumed in developing countries,
energy is available for utilities to market to consumers25.
predominantly in the rural and traditional sectors of the economy. The various
applications of biomass energy include thermal or heat, mechanical water Economic growth and power requirements have a circular relationship. Having
pumping for irrigation and power generation including village electrification and said that, it would not be possible for India to fuel its entire future power
industrial applications. requirements through fossil fuels (due to its limited availability). Renewable
power not only as an optional power source but also as a primary source can
India is the world's largest producer of cane sugar. The energy potential from
help the country electrify every corner as well as save significant amount of non-
cogeneration is estimated at 19,500 MW, which comprises around 3,500 MW of
renewable sources. German technological prowess and Indian energy
surplus power from bagasse-based cogeneration, and 16,000 MW of grid quality
requirements can help these ends meet successfully.
power from surplus biomass material. Notable initiatives for acceleration of the
biomass power generation program include granting interest subsidy,
concessional customs duties, exemptions from excise duty and sales tax, 100
percent corporate income tax holidays, accelerated depreciation, and soft loans
for commercial biomass-fired power projects.23
24
MNES
25
www.energy-business-review.com
23
sonnenseite.com years and current exchange rate for projections
16 17
Cumulative achievements in Solar Energy Space as on 31-01-2007 Small Hydro Power
Distributed Solar Power 2.92 MW Small and mini hydel projects have the potential to provide energy in remote and
hilly areas where extension of the grid system is un-economical. Realizing this
Solar Street Lightning System 54659 Nos.
fact, Government of India is encouraging the development of small and mini
Home Lightning System 301603 Nos. hydro power projects in the country. India has 420 small hydro power projects of
Solar Lantern 463058 Nos. up to 25 MW station capacity with an aggregate capacity of over 1423 MW.
Further, over 187 projects in this range with aggregate capacity of 521 MW are
Solar Power Plants 1859.8 kWp
under construction.
Solar Water Heating Systems 1.66 million sq. m. collector area
An estimated potential of about 15,000 MW of small hydro power projects exist in
Solar Cookers 6.03 lakh India. Ministry of New and Renewable Energy has created a database of 4096
Solar Photovoltaic Pumps 7068 Nos. potential sites with an aggregate capacity of 10,071 MW for projects with upto 25
MW capacity.
Source: MNES Website
Hydrogen Power
Business Case
Hydrogen is a clean fuel and an efficient energy storage medium for various
Tata BP Solar a Joint Venture (JV) between Tata Power Company and BP applications. The Ministry of Non-Conventional Energy Sources (MNES) is
Solar, one of the largest solar companies in the world uses state-of-the-art implementing various research, development and demonstration projects in
technology to offer high-quality, innovative solar solutions that cater to the hydrogen energy including the production, storage and utilization of hydrogen for
needs of individual customers, large institutions as well as entire communities.
stationary/portable and vehicle applications24.
Tata BP Solar has the distinction of being the only Indian solar company to
Conclusion
regularly export its products and systems to dozens of countries across five
continents. More than 60 percent of its sales come from exports, with more India can adopt the German model for the development of renewable energy.
than 95 percent of the exports going to Europe and America. The main reason for the growth of renewable energy in Germany could be
attributed to Renewable Energy Law, which has created a 'fixed feed-in' tariff
Biomass and Cogeneration system. This system guarantees minimum prices to renewable energy suppliers
and obligates grid operators to accept the energy onto their grids. This increases
At present, biomass contributes 14 percent of the total energy supply worldwide
the availability of green energy in the market On the distribution network the
and 38 percent of this energy is consumed in developing countries,
energy is available for utilities to market to consumers25.
predominantly in the rural and traditional sectors of the economy. The various
applications of biomass energy include thermal or heat, mechanical water Economic growth and power requirements have a circular relationship. Having
pumping for irrigation and power generation including village electrification and said that, it would not be possible for India to fuel its entire future power
industrial applications. requirements through fossil fuels (due to its limited availability). Renewable
power not only as an optional power source but also as a primary source can
India is the world's largest producer of cane sugar. The energy potential from
help the country electrify every corner as well as save significant amount of non-
cogeneration is estimated at 19,500 MW, which comprises around 3,500 MW of
renewable sources. German technological prowess and Indian energy
surplus power from bagasse-based cogeneration, and 16,000 MW of grid quality
requirements can help these ends meet successfully.
power from surplus biomass material. Notable initiatives for acceleration of the
biomass power generation program include granting interest subsidy,
concessional customs duties, exemptions from excise duty and sales tax, 100
percent corporate income tax holidays, accelerated depreciation, and soft loans
for commercial biomass-fired power projects.23
24
MNES
25
www.energy-business-review.com
23
sonnenseite.com years and current exchange rate for projections
16 17
28
Currently, India has one of the lowest life insurance penetrations in the world at
Financial Services nearly 2.5 percent, which is expected to grow to around 6 to 7 percent by 2009-
1029. Similarly, the non-life market grew at a rate of 22.37 percent in 2006-07, with
Overview
the total premium collection valued at Euro 4.5 billion. The non-life insurance
Favorable demographics, rising income levels and increasing urbanization has market also low penetration especially on the health front, leaving enormous
led to higher disposable incomes and consumerism in India. The booming scope for foreign players to make a mark.
consumer finance space and healthy performance of corporate sector is
The German financial services powerhouse, The Allianz Group, forayed into the
attracting foreign players to set up shop in India. Retail portfolio now accounts for
Indian life insurance arena in 2001 as a JV with Bajaj Auto Ltd. During 2006-07,
a significant share of the total lending for most players, as retail lending has Bajaj Allianz continues to be at the second position amongst the private life
powered the explosive growth in the financial services sector. Global majors have insurers on the basis of new business premium and first position on the basis of
lined up aggressive plans, which are expected to further drive the growth of the the number of policies. The Allianz Group is planning to foray into the booming
market and increase asset penetration. asset management business in India30.
Banking remains the most dominant sector of the Indian financial system. Global players have been evaluating the Non-Banking Finance Company (NBFC)
Significant progress has been made to deregulate the banking sector, which in route as a means to tap the consumer finance opportunity. NBFCs are driving
terms has created new opportunities for introducing innovative products and asset penetration and are enabling wider distribution reach than the banking
launching new services. The Reserve Bank is expected to review the channel. Apart from traditional banking and financial services the Indian market
offers huge scope in areas like -
developments and may permit full-fledged market access to global banking
players post April 2009. l Consumer finance
l Small and Medium Enterprises (SME) finance
Indian capital markets also offers immense potential considering that only 4.9
l Agriculture and rural finance
percent of household assets are directed towards shares and debentures. The
l Life and non-life insurance
ever increasing demand for equity related financial products in urban and semi-
l Assets management and wealth management
urban areas has made Indian and foreign brokerage houses to mark aggressive
l Structured finance, distressed assets and private equity
expansion plans. Increasing FII investments and India centric funds are also
reflecting unmatched potential of Indian stock markets.
Indian Mutual Funds AUM Growth Projected Consumer Finance
India is the third biggest card market for Visa International in Asia Pacific after
Japan and Korea. There were approximately 26.5 million credit cards in India in
CAGR OF 22 percent
60
2006, up 35% from 2005. The number of credit card transactions has also risen (2006-2009)
50
to 36 percent, to reach about 149 million in 200626.India holds enormous potential
40 60
Euro Billion
for credit usage considering a high concentration of young population and rising 30 CAGR 33% 40
consumerism. 20 68.0
51.0 55.9
20
10 37.3
Despite a huge quantum jump in credit card penetration levels from 2.5 percent in 0 0
FY06 FY07 FY08E FY09E
2001 to 8.1 percent in 2005, India still lags behind when compared to some FY2003 FY2004 FY2005 FY2006 FY2007
Source: AMFI Source: SSKI Report on NBFC, 2006

developing countries, thereby leaving a large opportunity for card players to
capitalize.
Insurance industry (life and non-life) in India has witnessed tremendous activity
after the entry of private players in 2000. India is among the fastest growing life
insurance markets in the world with new business premium recording a CAGR of
40% over the period 2001-0727. Similarly, the non-life market grew at a rate of
22.37 percent in 2006-07, with the total premium collection valued at Euro 4.5
billion.
28
SSKI Report on Reliance Capital dated 5 July 2007
26 29
Euromonitor – Credit Card India 2007 Motilal Oswal Report on Reliance Capital, August 2007
27 30
SSKI Report on Reliance Capital dated 5 July 2007 Bajaj Allianz Annual Report 2006-07
18 19
28
Currently, India has one of the lowest life insurance penetrations in the world at
Financial Services nearly 2.5 percent, which is expected to grow to around 6 to 7 percent by 2009-
1029. Similarly, the non-life market grew at a rate of 22.37 percent in 2006-07, with
Overview
the total premium collection valued at Euro 4.5 billion. The non-life insurance
Favorable demographics, rising income levels and increasing urbanization has market also low penetration especially on the health front, leaving enormous
led to higher disposable incomes and consumerism in India. The booming scope for foreign players to make a mark.
consumer finance space and healthy performance of corporate sector is
The German financial services powerhouse, The Allianz Group, forayed into the
attracting foreign players to set up shop in India. Retail portfolio now accounts for
Indian life insurance arena in 2001 as a JV with Bajaj Auto Ltd. During 2006-07,
a significant share of the total lending for most players, as retail lending has Bajaj Allianz continues to be at the second position amongst the private life
powered the explosive growth in the financial services sector. Global majors have insurers on the basis of new business premium and first position on the basis of
lined up aggressive plans, which are expected to further drive the growth of the the number of policies. The Allianz Group is planning to foray into the booming
market and increase asset penetration. asset management business in India30.
Banking remains the most dominant sector of the Indian financial system. Global players have been evaluating the Non-Banking Finance Company (NBFC)
Significant progress has been made to deregulate the banking sector, which in route as a means to tap the consumer finance opportunity. NBFCs are driving
terms has created new opportunities for introducing innovative products and asset penetration and are enabling wider distribution reach than the banking
launching new services. The Reserve Bank is expected to review the channel. Apart from traditional banking and financial services the Indian market
offers huge scope in areas like -
developments and may permit full-fledged market access to global banking
players post April 2009. l Consumer finance
l Small and Medium Enterprises (SME) finance
Indian capital markets also offers immense potential considering that only 4.9
l Agriculture and rural finance
percent of household assets are directed towards shares and debentures. The
l Life and non-life insurance
ever increasing demand for equity related financial products in urban and semi-
l Assets management and wealth management
urban areas has made Indian and foreign brokerage houses to mark aggressive
l Structured finance, distressed assets and private equity
expansion plans. Increasing FII investments and India centric funds are also
reflecting unmatched potential of Indian stock markets.
Indian Mutual Funds AUM Growth Projected Consumer Finance
India is the third biggest card market for Visa International in Asia Pacific after
Japan and Korea. There were approximately 26.5 million credit cards in India in
CAGR OF 22 percent
60
2006, up 35% from 2005. The number of credit card transactions has also risen (2006-2009)
50
to 36 percent, to reach about 149 million in 200626.India holds enormous potential
40 60
Euro Billion
for credit usage considering a high concentration of young population and rising 30 CAGR 33% 40
consumerism. 20 68.0
51.0 55.9
20
10 37.3
Despite a huge quantum jump in credit card penetration levels from 2.5 percent in 0 0
FY06 FY07 FY08E FY09E
2001 to 8.1 percent in 2005, India still lags behind when compared to some FY2003 FY2004 FY2005 FY2006 FY2007
Source: AMFI Source: SSKI Report on NBFC, 2006

developing countries, thereby leaving a large opportunity for card players to
capitalize.
Insurance industry (life and non-life) in India has witnessed tremendous activity
after the entry of private players in 2000. India is among the fastest growing life
insurance markets in the world with new business premium recording a CAGR of
40% over the period 2001-0727. Similarly, the non-life market grew at a rate of
22.37 percent in 2006-07, with the total premium collection valued at Euro 4.5
billion.
28
SSKI Report on Reliance Capital dated 5 July 2007
26 29
Euromonitor – Credit Card India 2007 Motilal Oswal Report on Reliance Capital, August 2007
27 30
SSKI Report on Reliance Capital dated 5 July 2007 Bajaj Allianz Annual Report 2006-07
18 19
German banking major, Deutsche Bank is looking at setting up a NBFC in India Food, Consumer Goods and Retailing
by early 2008. Deutsche Bank started retail banking operations in 2005 and plans
to offer consumer loans and mortgage to customers through its NBFC. Also, Overview
Deutsche Bank had earlier launched co-branded credit card with Lufthansa
At present, India is the twelfth largest consumer market in the world. Booming
Airlines. Deutsche Bank has 2 60,000 credit cards holders in India since it
consumerism, a large middle class population and their rising level of affluence
launched its credit card operations last year. Deutsche Bank has reported a
coupled with rising private consumption is making India one of the largest
63.29 percent rise in its net profit for 2006-07 in India. The net profit of the bank
consumer markets across the globe. India offers tremendous market potential for
stood at EUR 22 million, while its total income came at EUR 203 million for the
food products, consumer goods and organized retailing.
same. Private consumption as a
percentage of GDP (2005) India is second largest food
Liberalizing Impetus to growth in the Indian Financial sector 80
70 producer, as it is endowed with a
70 62
The Indian regulators are in the process of liberalizing the rules across various 57 58 large production base for a variety
60
avenues in the Indian financial services sector, especially the banking sector, 50 of raw materials covering food
41
where the Reserve Bank is expected to review the developments and accordingly 40 crops, commercial crops and
permit full-fledged market access to global banking players post April 2009. 30
fibres due to its varied agro-
20
Again, the Indian Government is considering raising FDI cap in insurance sector climatic conditions. The domestic
10
to 49 percent from the current permissible 26 percent of the Indian joint venture 0 processed-food market is
China Japan Europe India United States
company under the automatic route. Foreign asset management companies are expected to grow from about EUR
increasingly making foray in the Indian markets, given the opportunities in the Source: Credit Suisse Estimates 80 billion in 2004 to EUR 226
considering that asset management sector. Indian Government allows 100 billion in 2015. The Indian Government aims to increase its share of world trade
percent FDI in the asset management business under the automatic route. in this sector to 3 percent by 2015 (EUR 14.6 billion). 31
Opportunities The Indian Government has estimated an investment opportunity of over EUR 15
billion by 2015 across the food and agro sector and to further uphold this sector
The German banking system is often regarded as one of the prototypes of
the government allows automatic approval for foreign equity up to 100 percent
universal banking, wherein banks offer a variety of financial services under one
for most of the processed food items except alcohol, beer and those reserved for
roof. The German financial services sector is among the most mature and
small-scale sector.32 Numerous German companies are expanding their
sophisticated in the world. The ongoing globalization and integration of the EU is
operations to India across various areas of the Indian food industry ranging from
bringing in radical changes in the German financial arena. The German financial
food technology and machinery to ready meals. German brands like Knorr
services sector possesses several key capabilities in terms of sophisticated new
(Unilever), Dr. Oetker etc. are speeding their India progress. The same is also
product development, capabilities to cater to diverse customer segments,
indicated from the rising FDI from Germany in the Indian food sector.
scalable architecture using technology-enabled self service channels, developing
effective distribution channels and experience in managing pension funds. These
strengths can effectively be applied in the Indian context.
Breakdown of organised retailing (2006)

Jewellery
Other
3%
9%
Telecom
3%
Wacthes
3% Clothing
Furniture 39%
7%
Catering
7%
Consumer
Durables
9% Food
Footwear
9% 11%
Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective 31
Investment Commission Report
years and current exchange rate for projections 32
20 21
German banking major, Deutsche Bank is looking at setting up a NBFC in India Food, Consumer Goods and Retailing
by early 2008. Deutsche Bank started retail banking operations in 2005 and plans
to offer consumer loans and mortgage to customers through its NBFC. Also, Overview
Deutsche Bank had earlier launched co-branded credit card with Lufthansa
At present, India is the twelfth largest consumer market in the world. Booming
Airlines. Deutsche Bank has 2 60,000 credit cards holders in India since it
consumerism, a large middle class population and their rising level of affluence
launched its credit card operations last year. Deutsche Bank has reported a
coupled with rising private consumption is making India one of the largest
63.29 percent rise in its net profit for 2006-07 in India. The net profit of the bank
consumer markets across the globe. India offers tremendous market potential for
stood at EUR 22 million, while its total income came at EUR 203 million for the
food products, consumer goods and organized retailing.
same. Private consumption as a
percentage of GDP (2005) India is second largest food
Liberalizing Impetus to growth in the Indian Financial sector 80
70 producer, as it is endowed with a
70 62
The Indian regulators are in the process of liberalizing the rules across various 57 58 large production base for a variety
60
avenues in the Indian financial services sector, especially the banking sector, 50 of raw materials covering food
41
where the Reserve Bank is expected to review the developments and accordingly 40 crops, commercial crops and
permit full-fledged market access to global banking players post April 2009. 30
fibres due to its varied agro-
20
Again, the Indian Government is considering raising FDI cap in insurance sector climatic conditions. The domestic
10
to 49 percent from the current permissible 26 percent of the Indian joint venture 0 processed-food market is
China Japan Europe India United States
company under the automatic route. Foreign asset management companies are expected to grow from about EUR
increasingly making foray in the Indian markets, given the opportunities in the Source: Credit Suisse Estimates 80 billion in 2004 to EUR 226
considering that asset management sector. Indian Government allows 100 billion in 2015. The Indian Government aims to increase its share of world trade
percent FDI in the asset management business under the automatic route. in this sector to 3 percent by 2015 (EUR 14.6 billion). 31
Opportunities The Indian Government has estimated an investment opportunity of over EUR 15
billion by 2015 across the food and agro sector and to further uphold this sector
The German banking system is often regarded as one of the prototypes of
the government allows automatic approval for foreign equity up to 100 percent
universal banking, wherein banks offer a variety of financial services under one
for most of the processed food items except alcohol, beer and those reserved for
roof. The German financial services sector is among the most mature and
small-scale sector.32 Numerous German companies are expanding their
sophisticated in the world. The ongoing globalization and integration of the EU is
operations to India across various areas of the Indian food industry ranging from
bringing in radical changes in the German financial arena. The German financial
food technology and machinery to ready meals. German brands like Knorr
services sector possesses several key capabilities in terms of sophisticated new
(Unilever), Dr. Oetker etc. are speeding their India progress. The same is also
product development, capabilities to cater to diverse customer segments,
indicated from the rising FDI from Germany in the Indian food sector.
scalable architecture using technology-enabled self service channels, developing
effective distribution channels and experience in managing pension funds. These
strengths can effectively be applied in the Indian context.
Breakdown of organised retailing (2006)

Jewellery
Other
3%
9%
Telecom
3%
Wacthes
3% Clothing
Furniture 39%
7%
Catering
7%
Consumer
Durables
9% Food
Footwear
9% 11%
20 21
Emergence of organized retailing is rapidly changing the face of Indian retail
industry. The Indian retail industry is estimated at around EUR 216 billion and
Hardware and Electronics
organized retailing accounts for a mere 4.6 percent (EUR 10 billion) of the total
Semiconductor and Electronic Manufacturing Services (EMS)
retailing. Organized retailing is expected to reach to 11 percent (EUR 24.8 billion)
of total retail market, which is estimated to register a CAGR of 30-35 percent India is fast becoming an attractive location for electronics manufacturing service
33
over a period of next five years . providers and semiconductor manufacturing. This is but natural, considering the
immense potential of its domestic market and a region that offers low-cost
Germany has traditionally been a stronghold for the food and beverage industry.
production.
Germany has a proven presence in the European food markets and is host to
5,900 companies that generated a turnover of more than EUR 138 billion in The recent acceleration in EMS activity in India is due to the rapid growth in all
2006. India companies can gain significant by acquiring German technological segments of the market for electronic hardware products. Growing domestic
capabilities in areas of food technology34. demand and a highly talented workforce, especially for design and engineering
services, has encouraged global EMS majors to develop an India presence. The
Germany also has a well-developed and well-established retail industry. German
overall Indian electronics industry is expected to grow from EUR 9.2 billion in
retailers can consider setting up sourcing operations in India, as global retailers
2004 to EUR 29.2 billion in 2010, according to research firm In-Sta.35
like Wal-Mart, Tesco etc. are increasingly sourcing from India, given India's cost-
efficient quality products. India is likely to be a big gainer in the global EMS outsourcing space, accounting
for a projected 10 percent of the total outsourced production in 2010, up from 2
percent in 2005. Global electronics outsourced production is likely to expand to
EUR 275.7 billion in 2010, from EUR 167 billion in 2005. Based on these
projections, the annual output in India of electronics outsourcing groups, is likely
Business Case
to rise to EUR 28.32 billion in 2010, compared to EUR 4 billion in 2005.36
German retailing major Metro AG started operations in India in 2003 under the
India's Electronic Production Consumer Electronics
wholesale (cash and carry) format. At present, Metro has operations in two major
2006
cities and plans to spread to another two locations by end of 2007. Metro has Industrial Electronics
also lined up an investment of EUR 270 million in India. Simultaneously, the 2005 Computers
Company is increasingly sourcing leather products, textiles etc. from its India
Communication & Broadcast
2004
base to meet the needs of its global operations. Equipment
Strategic Electronics
2003
Components
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Euro Billion
Source: Ministry of Information and Communication Technology, India
India’s Electronic Production

India has the potential to emerge as the next hub of semiconductor

manufacturing. In addition to this, India holds enormous appeal for different parts
of the semiconductor value chain, from board, chip and systems design to
finished electronic products.
According to the India Semiconductor Association (ISA), India has already

emerged as a preferred destination for chip designing and embedded software
purely because of the talent pool. India’s share in the global semiconductor
industry is estimated to be around EUR 26.5 billion by 2015, accounting for 6.5
33
CLSA percent of the global semiconductor revenues.37
34
Invest In Germany Website 35
ELCINA
FT 23 May 07
ISA
22 23
Emergence of organized retailing is rapidly changing the face of Indian retail
industry. The Indian retail industry is estimated at around EUR 216 billion and
Hardware and Electronics
organized retailing accounts for a mere 4.6 percent (EUR 10 billion) of the total
Semiconductor and Electronic Manufacturing Services (EMS)
retailing. Organized retailing is expected to reach to 11 percent (EUR 24.8 billion)
of total retail market, which is estimated to register a CAGR of 30-35 percent India is fast becoming an attractive location for electronics manufacturing service
33
over a period of next five years . providers and semiconductor manufacturing. This is but natural, considering the
immense potential of its domestic market and a region that offers low-cost
Germany has traditionally been a stronghold for the food and beverage industry.
production.
Germany has a proven presence in the European food markets and is host to
5,900 companies that generated a turnover of more than EUR 138 billion in The recent acceleration in EMS activity in India is due to the rapid growth in all
2006. India companies can gain significant by acquiring German technological segments of the market for electronic hardware products. Growing domestic
capabilities in areas of food technology34. demand and a highly talented workforce, especially for design and engineering
services, has encouraged global EMS majors to develop an India presence. The
Germany also has a well-developed and well-established retail industry. German
overall Indian electronics industry is expected to grow from EUR 9.2 billion in
retailers can consider setting up sourcing operations in India, as global retailers
2004 to EUR 29.2 billion in 2010, according to research firm In-Sta.35
like Wal-Mart, Tesco etc. are increasingly sourcing from India, given India's cost-
efficient quality products. India is likely to be a big gainer in the global EMS outsourcing space, accounting
for a projected 10 percent of the total outsourced production in 2010, up from 2
percent in 2005. Global electronics outsourced production is likely to expand to
EUR 275.7 billion in 2010, from EUR 167 billion in 2005. Based on these
projections, the annual output in India of electronics outsourcing groups, is likely
Business Case
to rise to EUR 28.32 billion in 2010, compared to EUR 4 billion in 2005.36
German retailing major Metro AG started operations in India in 2003 under the
India's Electronic Production Consumer Electronics
wholesale (cash and carry) format. At present, Metro has operations in two major
2006
cities and plans to spread to another two locations by end of 2007. Metro has Industrial Electronics
also lined up an investment of EUR 270 million in India. Simultaneously, the 2005 Computers
Company is increasingly sourcing leather products, textiles etc. from its India
Communication & Broadcast
2004
base to meet the needs of its global operations. Equipment
Strategic Electronics
2003
Components
0.0 2.0 4.0 6.0 8.0 10.0 12.0
Euro Billion
India’s Electronic Production

India has the potential to emerge as the next hub of semiconductor

manufacturing. In addition to this, India holds enormous appeal for different parts
of the semiconductor value chain, from board, chip and systems design to
finished electronic products.
According to the India Semiconductor Association (ISA), India has already

emerged as a preferred destination for chip designing and embedded software
purely because of the talent pool. India’s share in the global semiconductor
industry is estimated to be around EUR 26.5 billion by 2015, accounting for 6.5
33
CLSA percent of the global semiconductor revenues.37
34
Invest In Germany Website 35
ELCINA
FT 23 May 07
ISA
22 23
According to iSuppli, there are approximately 125 companies involved in Germany represents the largest European semiconductor market, with over 35
designing semiconductors in India. This has led major EDA (Electronic Design percent share in consumption and average volume growth rates of 10 percent per
Automation) tools suppliers- like Cadence Design Systems, Synopsys and year over the last decade. In 2006, Germany’s electronics industry recorded a
Mentor to expand their Indian business. Giant multinationals like Texas turnover of EUR 179 billion, of which over EUR 94 billion has from domestic
Instruments, Intel, Cypress, Infineon and STMicroelectronics accounted for a customers.39
major part of the total semiconductor design industry in India. Indian companies,
India offers a vast opportunity for German electronics and semiconductor players
including MosChip and eInfochips Inc., are also planning to expand their design
to capitalize on the huge domestic market spanning across all spectrums of
operations quickly.
electronics hardware. Again, Germany can benefit from the cost efficient
India’s Electronics Equipment and Semiconductors Production (as a production capability that India offers, along with a skilled workforce. Similarly,
7 percent Share in the Global Market) 6.5 Indian companies also have an opportunity to collaborate, in order to bring home
X of Global Market 6 the highly recognized German production and innovation capabilities considering
5 their high technological standards, efficient business execution and long term
4.9
4 3.4 commitment.
3
2 Telecom Hardware
2 1.2 2.52
0.9
1 India with a telecom network of over 225 million connections is among the fastest
1.22
0.62 0.69
0 growing telecommunications market in the world. The Indian telecom sector
2003 2005 2007E 2010E 2015E
continues to expand at a blistering pace and has moved to a higher growth path
Source: ISA Electronics Equiment Semiconductors with an average growth rate of over 40 percent from the earlier average of 20-25
percent during 2002-03. The Department of Telecom has set a target of providing
India also offers high potential for electronic equipment manufacturing
500 million telephone connections by 2010. Wireless continues to dominate the
companies. The estimated production of EUR 113 billion in 2015 is expected to
Indian user growth with 8.06 million subscribers added in the month of July 2007
create an opportunity of EUR 11.33 billion for semiconductor companies and also
alone.40
for EMS companies.38
The Indian electronics industry, which uses consumes semiconductors, is

evolving in a big way. OEMs like Nokia, Alcatel and Videocon, have set up plants 600 Indian Telecom Subscriber Base
500
500 461
in India. Companies specializing in hardware services and board manufacturing,
400
system integrators, software IP firms and industrial design firms have already
Millions
300
established their presence. 206
200 165
140
The presence of global EMS majors like Flextronics, Jabil, Elcoteq, is creating 94 99
100 52
potential for a quantum jump in hardware manufacturing in India and should have
0
a positive downstream effect on demand for components and assemblies. FY2005 FY2006 FY2007 FY2010E
Companies like Flextronics, Nokia and Jabil Circuit have committed investments Telephone Subscribers Wireless
to the tune of EUR 73-110 million over the next two to three years. This will
Source: TRAI, SSKI
largely cater to domestic demand for Communication and IT products
In 2006, India produced approximately 31 million mobile handsets amounting to
Considering this huge opportunity in the EMS and Semiconductor space, the
approximately EUR 4 billion. Production volumes are expected to grow at a
Indian Government, has lined up various incentives to attract investments. The
CAGR of 25 percent to nearly 95 million units during the period 2006-11.41 Gartner
Government would provide capital subsidy for the investors setting up chip
estimates that, India is expected to register the highest growth in the Asia-Pacific
manufacturing units in India, under the semiconductor policy. This subsidy would
region in handset production with over 51 million units in 2007.
be in the form of tax breaks and interest-free loans. Again, the Indian government
is encouraging Electronic Hardware Technology Parks (EHTP) to foster
39
electronics manufacturing in the country. Invest in Germany Website
40
Ministry of Telecom, TRAI
38 41
ISA The Washington Post June 25, 2007
24 25
According to iSuppli, there are approximately 125 companies involved in Germany represents the largest European semiconductor market, with over 35
designing semiconductors in India. This has led major EDA (Electronic Design percent share in consumption and average volume growth rates of 10 percent per
Automation) tools suppliers- like Cadence Design Systems, Synopsys and year over the last decade. In 2006, Germany’s electronics industry recorded a
Mentor to expand their Indian business. Giant multinationals like Texas turnover of EUR 179 billion, of which over EUR 94 billion has from domestic
Instruments, Intel, Cypress, Infineon and STMicroelectronics accounted for a customers.39
major part of the total semiconductor design industry in India. Indian companies,
India offers a vast opportunity for German electronics and semiconductor players
including MosChip and eInfochips Inc., are also planning to expand their design
to capitalize on the huge domestic market spanning across all spectrums of
operations quickly.
electronics hardware. Again, Germany can benefit from the cost efficient
India’s Electronics Equipment and Semiconductors Production (as a production capability that India offers, along with a skilled workforce. Similarly,
7 percent Share in the Global Market) 6.5 Indian companies also have an opportunity to collaborate, in order to bring home
X of Global Market 6 the highly recognized German production and innovation capabilities considering
5 their high technological standards, efficient business execution and long term
4.9
4 3.4 commitment.
3
2 Telecom Hardware
2 1.2 2.52
0.9
1 India with a telecom network of over 225 million connections is among the fastest
1.22
0.62 0.69
0 growing telecommunications market in the world. The Indian telecom sector
2003 2005 2007E 2010E 2015E
continues to expand at a blistering pace and has moved to a higher growth path
Source: ISA Electronics Equiment Semiconductors with an average growth rate of over 40 percent from the earlier average of 20-25
percent during 2002-03. The Department of Telecom has set a target of providing
India also offers high potential for electronic equipment manufacturing
500 million telephone connections by 2010. Wireless continues to dominate the
companies. The estimated production of EUR 113 billion in 2015 is expected to
Indian user growth with 8.06 million subscribers added in the month of July 2007
create an opportunity of EUR 11.33 billion for semiconductor companies and also
alone.40
for EMS companies.38
The Indian electronics industry, which uses consumes semiconductors, is

evolving in a big way. OEMs like Nokia, Alcatel and Videocon, have set up plants 600 Indian Telecom Subscriber Base
500
500 461
in India. Companies specializing in hardware services and board manufacturing,
400
system integrators, software IP firms and industrial design firms have already
Millions
300
established their presence. 206
200 165
140
The presence of global EMS majors like Flextronics, Jabil, Elcoteq, is creating 94 99
100 52
potential for a quantum jump in hardware manufacturing in India and should have
0
a positive downstream effect on demand for components and assemblies. FY2005 FY2006 FY2007 FY2010E
Companies like Flextronics, Nokia and Jabil Circuit have committed investments Telephone Subscribers Wireless
to the tune of EUR 73-110 million over the next two to three years. This will
Source: TRAI, SSKI
largely cater to domestic demand for Communication and IT products
In 2006, India produced approximately 31 million mobile handsets amounting to
Considering this huge opportunity in the EMS and Semiconductor space, the
approximately EUR 4 billion. Production volumes are expected to grow at a
Indian Government, has lined up various incentives to attract investments. The
CAGR of 25 percent to nearly 95 million units during the period 2006-11.41 Gartner
Government would provide capital subsidy for the investors setting up chip
estimates that, India is expected to register the highest growth in the Asia-Pacific
manufacturing units in India, under the semiconductor policy. This subsidy would
region in handset production with over 51 million units in 2007.
be in the form of tax breaks and interest-free loans. Again, the Indian government
is encouraging Electronic Hardware Technology Parks (EHTP) to foster
39
electronics manufacturing in the country. Invest in Germany Website
40
Ministry of Telecom, TRAI
38 41
ISA The Washington Post June 25, 2007
24 25
Telecom investments in India are pegged at over EUR 10.45 billion, aimed at Germany has Europe’s largest telecommunications market, supported by a large
42
massive expansion of mobile networks, infrastructure and subscriber numbers. and affluent population receptive to emerging technologies. Germany houses the
A recent study by telecom regulator Telecom Regulatory Authority of India (TRAI) world’s leaders in telecommunications, served by a modern telephone system.
has estimated that the country will need about 350,000 telecom towers by 2010,
India offers an unprecedented opportunity for German telecom infrastructure
as against 125,000 in 2007. Again, the overall structure cabling market in India is
vendors, equipment manufacturers and associated services companies to take
expected to touch EUR 251.85 million by 2010 with a CAGR of 22 percent from
opportunity of the large expansion plans of Indian mobile operators in coming
2005. With the telecom equipment manufacturing base in the country evolving,
years.
the government has set a target of EUR 7.3 billion for equipment exports by
2012.43
Investment plans of major Telco 2007-08 (EUR billion)

Reliance Communications 2.79-3.49
Bharti Airtel 2.09-2.44
Hutch-Essar 1.39-1.74
Idea Cellular 1.05
Tata Teleservices 1.05
BSNL 0.87-1.05
Source: COAI, Company and investment reports, Business Standard
India, in order to support this phenomenal growth, will require massive

investment towards building the telecom infrastructure, which also provides an
opportunity for foreign players to participate. The Indian Government has lined up
various incentives to promote telecom equipments manufacturing, the major
ones being –
l 100 percent Foreign Direct Investment (FDI) through automatic route.
l Fully repatriable dividend income and capital invested
l Payment of technical know-how fee of up to approximately EUR 1.46 million
and royalty up to 5 percent on domestic sales and 8 percent on export sales,
net of taxes, through automatic route.
l Promotion of telecom product specific Special Economic Zones (SEZ).
Manufacturing plans of key equipment vendors in India

OEM Location Plans Investment
Nokia Chennai Commenced commercial production of EUR 110 million (for handsets and
mobile handsets at its India factory on 2 network equipment) over three
January 2006 and produced a record 25 years
million handsets in the first year of operation.
Nokia Siemens Tamil Nadu Plans to set up a telecommunication EUR 73 million over three years.
Networks equipment manufacturing facility for wireless Commercial production to begin in
network equipment. 2008
Motorola Chennai Plans to set up a facility for manufacturing of Initial investment of EUR 22 million to go
handsets. up to EUR 73 million
Elcoteq Bangalore Telecom manufacturing Invested EUR 13.14 million out of EUR
73 million committed
Ericsson Jaipur Facility for manufacturing GSM Base Invested EUR 73 million
Stationsand Mobile Switching equipment.
LG Pune Telecom manufacturing EUR 8.76 million
Source: Macquarie Research, Ministry of Telecom
42 Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
Business Standard July 30, 2007 years and current exchange rate for projections
43
Business Standard August 23, 2007
26 27
Telecom investments in India are pegged at over EUR 10.45 billion, aimed at Germany has Europe’s largest telecommunications market, supported by a large
42
massive expansion of mobile networks, infrastructure and subscriber numbers. and affluent population receptive to emerging technologies. Germany houses the
A recent study by telecom regulator Telecom Regulatory Authority of India (TRAI) world’s leaders in telecommunications, served by a modern telephone system.
has estimated that the country will need about 350,000 telecom towers by 2010,
India offers an unprecedented opportunity for German telecom infrastructure
as against 125,000 in 2007. Again, the overall structure cabling market in India is
vendors, equipment manufacturers and associated services companies to take
expected to touch EUR 251.85 million by 2010 with a CAGR of 22 percent from
opportunity of the large expansion plans of Indian mobile operators in coming
2005. With the telecom equipment manufacturing base in the country evolving,
years.
the government has set a target of EUR 7.3 billion for equipment exports by
2012.43
Investment plans of major Telco 2007-08 (EUR billion)

Reliance Communications 2.79-3.49
Bharti Airtel 2.09-2.44
Hutch-Essar 1.39-1.74
Idea Cellular 1.05
Tata Teleservices 1.05
BSNL 0.87-1.05
Source: COAI, Company and investment reports, Business Standard
India, in order to support this phenomenal growth, will require massive

investment towards building the telecom infrastructure, which also provides an
opportunity for foreign players to participate. The Indian Government has lined up
various incentives to promote telecom equipments manufacturing, the major
ones being –
l 100 percent Foreign Direct Investment (FDI) through automatic route.
l Fully repatriable dividend income and capital invested
l Payment of technical know-how fee of up to approximately EUR 1.46 million
and royalty up to 5 percent on domestic sales and 8 percent on export sales,
net of taxes, through automatic route.
l Promotion of telecom product specific Special Economic Zones (SEZ).
Manufacturing plans of key equipment vendors in India

OEM Location Plans Investment
Nokia Chennai Commenced commercial production of EUR 110 million (for handsets and
mobile handsets at its India factory on 2 network equipment) over three
January 2006 and produced a record 25 years
million handsets in the first year of operation.
Nokia Siemens Tamil Nadu Plans to set up a telecommunication EUR 73 million over three years.
Networks equipment manufacturing facility for wireless Commercial production to begin in
network equipment. 2008
Motorola Chennai Plans to set up a facility for manufacturing of Initial investment of EUR 22 million to go
handsets. up to EUR 73 million
Elcoteq Bangalore Telecom manufacturing Invested EUR 13.14 million out of EUR
73 million committed
Ericsson Jaipur Facility for manufacturing GSM Base Invested EUR 73 million
Stationsand Mobile Switching equipment.
LG Pune Telecom manufacturing EUR 8.76 million
Source: Macquarie Research, Ministry of Telecom
42 Note: INR –EUR and USD – EUR conversion rate is average of 365 days of respective
Business Standard July 30, 2007 years and current exchange rate for projections
43
Business Standard August 23, 2007
26 27
Outsourcing Post production activities: India can provide quality services in
Media and Entertainment both generic and industry-specific applications including animated television
production and post-production to produce material for TV channels.
Overview
Theatre/ Multiplex Infrastructure: India, which is one of the most under-screened
Media and Entertainment (M&E) is one of the fastest growing sectors in India.
film markets, offers significant opportunities in the theatre and multiplex
The size of the sector was pegged at about EUR 8 billion in 2006 and is expected
Infrastructure space. Given the robust growth of M&E sector, many corporate
to grow at a CAGR of 18 percent till 201144. On the other hand, the German media
players have entered this space.
industry size was around 49 billion Euros45 in 2006. Given the enduring
relationship between India and Germany there is a huge scope for co-operation
in the M&E sector.
Indo- German success stories:

l India and Germany signed an agreement on audio visual co-production in
Berlin, in February 2007. The film agreement provides a legal framework for
cooperation between producers from Germany and India. In addition to this,
films co-produced by German and Indian film-makers in accordance with the
agreement will receive the same treatment as national films
l Many German players are looking at entering the broadcasting segment in

India given their good relationship with the state broadcaster, Doordarshan
l Due to the presence of a huge Asian community in Germany, Sony

Entertainment Television Asia is was launched on Germany's pay TV
platform Decimus GmbH in 2004
Opportunities in India
Digitization of broadcasting: India is set to become Asia's leading cable market
by 2010 and the most lucrative pay television market by 2015. IPTV is expected
to reach about 7 million homes by 2010 and most of the established telecom
operators are entering this segment.
Online / Mobile Gaming: The internet user base in India is growing at a rapid
rate and youth accounts for 75 percent of all users46. Mobile gaming has grown
multi-fold in India and downloads of mobile games is a fast growing component in
the overall Mobile value added services pie. Several gaming companies, both
international as well as domestic, have entered into this space, considering the
huge revenue and market potential.
Animation: Globally, animation is a very big industry and in Europe, Germany, is

one of the leaders in this space. India with its abundant talent pool of highly
skilled engineers, world class software writers and animators, is fast becoming a
preferred destination for outsourcing of visual communication products.
44
SSKI report on Indian Media Industry June 2007, FICCI
45
Datamonitor report- Media in Germany, Dec 2006 Note: INR EUR and USD EUR conversion rate is average of 365 days of respective years
46
www.iamai.in and current exchange rate for projections
28 29
Outsourcing Post production activities: India can provide quality services in
Media and Entertainment both generic and industry-specific applications including animated television
production and post-production to produce material for TV channels.
Overview
Theatre/ Multiplex Infrastructure: India, which is one of the most under-screened
Media and Entertainment (M&E) is one of the fastest growing sectors in India.
film markets, offers significant opportunities in the theatre and multiplex
The size of the sector was pegged at about EUR 8 billion in 2006 and is expected
Infrastructure space. Given the robust growth of M&E sector, many corporate
to grow at a CAGR of 18 percent till 201144. On the other hand, the German media
players have entered this space.
industry size was around 49 billion Euros45 in 2006. Given the enduring
relationship between India and Germany there is a huge scope for co-operation
in the M&E sector.
Indo- German success stories:

l India and Germany signed an agreement on audio visual co-production in
Berlin, in February 2007. The film agreement provides a legal framework for
cooperation between producers from Germany and India. In addition to this,
films co-produced by German and Indian film-makers in accordance with the
agreement will receive the same treatment as national films
l Many German players are looking at entering the broadcasting segment in

India given their good relationship with the state broadcaster, Doordarshan
l Due to the presence of a huge Asian community in Germany, Sony

Entertainment Television Asia is was launched on Germany's pay TV
platform Decimus GmbH in 2004
Opportunities in India
Digitization of broadcasting: India is set to become Asia's leading cable market
by 2010 and the most lucrative pay television market by 2015. IPTV is expected
to reach about 7 million homes by 2010 and most of the established telecom
operators are entering this segment.
Online / Mobile Gaming: The internet user base in India is growing at a rapid
rate and youth accounts for 75 percent of all users46. Mobile gaming has grown
multi-fold in India and downloads of mobile games is a fast growing component in
the overall Mobile value added services pie. Several gaming companies, both
international as well as domestic, have entered into this space, considering the
huge revenue and market potential.
Animation: Globally, animation is a very big industry and in Europe, Germany, is

one of the leaders in this space. India with its abundant talent pool of highly
skilled engineers, world class software writers and animators, is fast becoming a
preferred destination for outsourcing of visual communication products.
44
SSKI report on Indian Media Industry June 2007, FICCI
45
Datamonitor report- Media in Germany, Dec 2006 Note: INR EUR and USD EUR conversion rate is average of 365 days of respective years
46
www.iamai.in and current exchange rate for projections
28 29
deficiencies, etc. Hence, there is good opportunity for German companies to
Pharmaceuticals invest in R&D operations in India either by setting up their subsidiaries or through
joint research and collaboration with Indian companies. In / out licensing
Introduction
agreements will not only strengthen the product pipelines and widen the
The Indian pharma industry is one of the fastest growing pharmaceutical markets therapeutic focus but will also promote process and technology sharing.
in the world and is rapidly integrating with the global pharmaceutical industry. Therefore, these agreements will create a win-win situation for both countries.
India is now viewed as a producer of international quality drugs. Germany on the
Contract Research and Manufacturing Services
other hand, is one of the largest pharmaceutical markets in the world.
With mounting cost pressures, cost rationalization has become a strategic
The recent years have seen high levels of cross-country trade, investment and
imperative for pharma companies the world over. India offers certain competitive
collaborations between India and Germany. German companies are increasingly
advantages over other countries such as low cost of manufacturing, largest
setting up operations in India either through subsidiaries, JVs or outsourcing part
number of U.S. Food and Drugs Administration (USFDA) approved plants
of their research or manufacturing activities to India.
outside the U.S., efficient talent pool having strong chemistry skills, etc. Owing to
At the same time, Indian companies are focusing on gaining a strong foothold in these inherent strengths, global pharma majors are increasingly outsourcing
Germany and simultaneously expanding to neighboring markets through equity parts of their drug development and manufacturing activities to India. Making
buyouts or through strategic distribution and sales alliances and agreements. India a part of their value chain. German companies can outsource part of their
Hence, there exist several opportunities for mutual cooperation and collaboration operations such as early drug discovery, preclinical testing, clinical trial activities
between India and Germany in the pharmaceuticals sector. as well as manufacturing of intermediates and Active Pharmaceutical Ingredients
(APIs) for New Chemical Entities (NCEs) or generics to Indian companies.
India – Germany joint initiatives:
The Indian Council of Medical Research and the Helmholtz Association of
Opportunities in Germany
National Research Centres announced the setting up of an Indo-German Generics
Science Centre for Infectious Diseases. The proposed five projects will be set up At present, the generics industry constitutes roughly 20 percent of Germany’s
over three years at an estimated cost of 4.5 billion Euros. The two partners will pharma industry. However the government of Germany is now promoting
share the cost equally. The centre will work in the areas of virology, developing generics, and has put in place several healthcare reforms to curb the rising
vaccines and anti-infectives, animal models of infective diseases and zoonosis. overall healthcare costs. This will offer significant opportunity to Indian players to
Opportunities in India establish and strengthen themselves in regulated markets as well as gain access
to world-class technology and processes. In order to create a strong foothold
Domestic Market
and reduce entry time, several India companies have taken the inorganic route to
The Indian pharma industry is expected to grow at a CAGR of 7.2 percent growth and acquired German pharma companies.
between 2006 and 2011 and touch Euro 10.4 billion by 2011. Some of the high
Some of the prominent deals include;
potential segments include oncology, cardio vascular, anti-infective, etc.
Date Target Acquirer
Although at present, generics are the mainstay of the Indian market, the
introduction of the product patents in India in 2005 has instilled confidence in Feb-06 Betapharma (Germany’s fourth-largest generics) Dr Reddy’s Laboratories
global players about the Indian markets. Many MNC pharma companies are Jun-05 Heumann Pharma GmbH & Co (a Pfizer Torrent Pharmaceuticals
planning to launch their global patented products in India. This provides a group company)
sizeable opportunity to German pharma companies to launch their patented May-04 Esparma GmbH Wockhardt Ltd.
products in the Indian markets.
Life-style disease segment and drugs
R&D: Joint collaboration and innovative licensing models
With the proportion of the ageing population over 65 expected to grow from18.9
In the recent years, many Indian pharma companies such as Ranbaxy, Dr percent in 2005 to 20.4 percent by the end of the decade, the demand for drugs
Reddy’s, Sun Pharma, Glenmark, etc., have made New Chemical Entity (NCE) for treatments related to old age condition and care is also expected to grow
research an integral part of their growth strategy and have scaled up operations significantly. Also the lifestyle disease segment is expected to witness substantial
in this segment. Although Indian companies are equipped with extensive growth over this period. Indian players can explore opportunities in these
knowledge in chemistry, they lack the experience and financial resources to segments.
conduct full-fledged activities in this segment. On the other hand, Germany has a
strong background and experience in the field of R&D, especially in areas such
as cardiovascular diseases, oncology, inflammatory diseases, auto-immune
Note: INR EUR and USD EUR conversion rate is average of 365 days of respective years
and current exchange rate for projections
30 31
deficiencies, etc. Hence, there is good opportunity for German companies to
Pharmaceuticals invest in R&D operations in India either by setting up their subsidiaries or through
joint research and collaboration with Indian companies. In / out licensing
Introduction
agreements will not only strengthen the product pipelines and widen the
The Indian pharma industry is one of the fastest growing pharmaceutical markets therapeutic focus but will also promote process and technology sharing.
in the world and is rapidly integrating with the global pharmaceutical industry. Therefore, these agreements will create a win-win situation for both countries.
India is now viewed as a producer of international quality drugs. Germany on the
Contract Research and Manufacturing Services
other hand, is one of the largest pharmaceutical markets in the world.
With mounting cost pressures, cost rationalization has become a strategic
The recent years have seen high levels of cross-country trade, investment and
imperative for pharma companies the world over. India offers certain competitive
collaborations between India and Germany. German companies are increasingly
advantages over other countries such as low cost of manufacturing, largest
setting up operations in India either through subsidiaries, JVs or outsourcing part
number of U.S. Food and Drugs Administration (USFDA) approved plants
of their research or manufacturing activities to India.
outside the U.S., efficient talent pool having strong chemistry skills, etc. Owing to
At the same time, Indian companies are focusing on gaining a strong foothold in these inherent strengths, global pharma majors are increasingly outsourcing
Germany and simultaneously expanding to neighboring markets through equity parts of their drug development and manufacturing activities to India. Making
buyouts or through strategic distribution and sales alliances and agreements. India a part of their value chain. German companies can outsource part of their
Hence, there exist several opportunities for mutual cooperation and collaboration operations such as early drug discovery, preclinical testing, clinical trial activities
between India and Germany in the pharmaceuticals sector. as well as manufacturing of intermediates and Active Pharmaceutical Ingredients
(APIs) for New Chemical Entities (NCEs) or generics to Indian companies.
India – Germany joint initiatives:
The Indian Council of Medical Research and the Helmholtz Association of
Opportunities in Germany
National Research Centres announced the setting up of an Indo-German Generics
Science Centre for Infectious Diseases. The proposed five projects will be set up At present, the generics industry constitutes roughly 20 percent of Germany’s
over three years at an estimated cost of 4.5 billion Euros. The two partners will pharma industry. However the government of Germany is now promoting
share the cost equally. The centre will work in the areas of virology, developing generics, and has put in place several healthcare reforms to curb the rising
vaccines and anti-infectives, animal models of infective diseases and zoonosis. overall healthcare costs. This will offer significant opportunity to Indian players to
Opportunities in India establish and strengthen themselves in regulated markets as well as gain access
to world-class technology and processes. In order to create a strong foothold
Domestic Market
and reduce entry time, several India companies have taken the inorganic route to
The Indian pharma industry is expected to grow at a CAGR of 7.2 percent growth and acquired German pharma companies.
between 2006 and 2011 and touch Euro 10.4 billion by 2011. Some of the high
Some of the prominent deals include;
potential segments include oncology, cardio vascular, anti-infective, etc.
Date Target Acquirer
Although at present, generics are the mainstay of the Indian market, the
introduction of the product patents in India in 2005 has instilled confidence in Feb-06 Betapharma (Germany’s fourth-largest generics) Dr Reddy’s Laboratories
global players about the Indian markets. Many MNC pharma companies are Jun-05 Heumann Pharma GmbH & Co (a Pfizer Torrent Pharmaceuticals
planning to launch their global patented products in India. This provides a group company)
sizeable opportunity to German pharma companies to launch their patented May-04 Esparma GmbH Wockhardt Ltd.
products in the Indian markets.
Life-style disease segment and drugs
R&D: Joint collaboration and innovative licensing models
With the proportion of the ageing population over 65 expected to grow from18.9
In the recent years, many Indian pharma companies such as Ranbaxy, Dr percent in 2005 to 20.4 percent by the end of the decade, the demand for drugs
Reddy’s, Sun Pharma, Glenmark, etc., have made New Chemical Entity (NCE) for treatments related to old age condition and care is also expected to grow
research an integral part of their growth strategy and have scaled up operations significantly. Also the lifestyle disease segment is expected to witness substantial
in this segment. Although Indian companies are equipped with extensive growth over this period. Indian players can explore opportunities in these
knowledge in chemistry, they lack the experience and financial resources to segments.
conduct full-fledged activities in this segment. On the other hand, Germany has a
strong background and experience in the field of R&D, especially in areas such
as cardiovascular diseases, oncology, inflammatory diseases, auto-immune
30 31
Space Technology and Aviation
Science and Technology
The German aviation and space industry has witnessed a steady growth at an
Overview
average rate of 9 percent per year, making it one of the best performing
Scientific discovery and technological innovation are providing the necessary
industries in Germany. The German aerospace industry has witnessed
impetus for India to be a powerhouse in areas of software, drugs, telecom, food,
sustainable growth due to its technological know-how and its strong innovative
medicine and medical equipment, auto parts, biotechnology etc. India, with its
capacity. German aerospace industry has more than 155 companies and
third largest pool of scientific and technical manpower, and a viable R&D base
institutions that employ over 85,500 highly skilled employees and invest between
and consistent high economic growth has made more than 300 multi-national
15 and 20 percent of sales (over EUR 19.5 billion per year) in R&D. International
companies to establish their R&D and technical centers in India. Global
aerospace companies investing in Germany have benefited from the country's
companies across IT, telecom, biotechnology, chemicals, automobiles, consumer
central role in the increasingly integrated European aerospace industry.48
goods and pharmaceuticals have set up their R&D hubs in India. .
Indian Space Research Organization (ISRO) is one of the few agencies with the
India's knowledge base in 2015
knowledge to build and launch satellites. India has the largest constellation of
2015
Remote Sensing Satellites, which are providing services both at the national and
2005 global levels. At present, ISRO holds nearly 25 percent of the EUR 87.6 million
60k
free-play market. India's progress in space technology has attracted international
25k
agencies to collaborate with Indian space institutions.
1.4m
350k
ANTRIX, the commercial arm of ISRO, has undertaken commercial satellite
10.3m 18.5m
launches of Tubsat (DLR -Germany) and BIRD (DLR -Germany). ISRO's satellite
launching charges are 30-35 percent lower than those of other launch agencies.
Doctors Engineers
With regard to space activities, German companies such as Tesat provide the Ku
Source: University Grants Commission, CLSA
band output multiplexer a highly sophisticated system bundling various signals
Germany has a prominent position in science, research and development. into a unified stream for the Indian satellite programme INSAT-4. Such
German products warrant quality and the famous German workmanship. The equipment, or the C band travelling wave tube amplifier for the Indian GSAT-5,
German government plans to invest an additional EUR 6 billion towards R&D in
exemplifies Tesat's long-standing co-operation with India.49
the existing legislative period. The government will also allocate around EUR 15
The civil aviation sector in India has been marked by fast-paced change in the
billion for cutting-edge technology through the year 200947.
past few years, largely driven by liberalization, has enabled the participation of
European Patent Applications
private players. Aircraft manufacturer Airbus estimates India's demand at 1100
35000
30000 aircrafts, worth EUR 76.65 billion, over the next 20 years.
No. Of Patents
25000 40000
20000 Business Case

15000
10000 European plane maker Airbus plans to invest more than EUR 730 million in the
5000
Indian aviation industry over a period of next ten years. Airbus would invest in
0
2000 2001 2002 2003 2004 2005 2006
areas of training, a maintenance facility and a design and engineering center.50
USA Germany Japan France UK Italy
Both Germany and India could leverage each other's strength in the areas of
Source: European Patent Office aviation and space technology, by which India can access Germany's cutting
Based on data filed in reference to inventors residence.
edge aviation technology and German businesses could benefit from the
Cooperation in science, research and technology between India and Germany tremendous potential of the Indian Market.
dates back to the 1960s. Subsequently, several special arrangements between
German and Indian research organizations were signed, aimed at initiating and
implementing common research projects as well as the exchange of scientists.
47
Federal Ministry of Education and Research, Germany 48
Invest in Germany Website
Note: INR EUR and USD EUR conversion rate is average of 365 days of respective years 49
CLSA Report 2005
and current exchange rate for projections 50
Reuters, May 7, 2007
32 33
Space Technology and Aviation
Science and Technology
The German aviation and space industry has witnessed a steady growth at an
Overview
average rate of 9 percent per year, making it one of the best performing
Scientific discovery and technological innovation are providing the necessary
industries in Germany. The German aerospace industry has witnessed
impetus for India to be a powerhouse in areas of software, drugs, telecom, food,
sustainable growth due to its technological know-how and its strong innovative
medicine and medical equipment, auto parts, biotechnology etc. India, with its
capacity. German aerospace industry has more than 155 companies and
third largest pool of scientific and technical manpower, and a viable R&D base
institutions that employ over 85,500 highly skilled employees and invest between
and consistent high economic growth has made more than 300 multi-national
15 and 20 percent of sales (over EUR 19.5 billion per year) in R&D. International
companies to establish their R&D and technical centers in India. Global
aerospace companies investing in Germany have benefited from the country's
companies across IT, telecom, biotechnology, chemicals, automobiles, consumer
central role in the increasingly integrated European aerospace industry.48
goods and pharmaceuticals have set up their R&D hubs in India. .
Indian Space Research Organization (ISRO) is one of the few agencies with the
India's knowledge base in 2015
knowledge to build and launch satellites. India has the largest constellation of
2015
Remote Sensing Satellites, which are providing services both at the national and
2005 global levels. At present, ISRO holds nearly 25 percent of the EUR 87.6 million
60k
free-play market. India's progress in space technology has attracted international
25k
agencies to collaborate with Indian space institutions.
1.4m
350k
ANTRIX, the commercial arm of ISRO, has undertaken commercial satellite
10.3m 18.5m
launches of Tubsat (DLR -Germany) and BIRD (DLR -Germany). ISRO's satellite
launching charges are 30-35 percent lower than those of other launch agencies.
Doctors Engineers
With regard to space activities, German companies such as Tesat provide the Ku
Source: University Grants Commission, CLSA
band output multiplexer a highly sophisticated system bundling various signals
Germany has a prominent position in science, research and development. into a unified stream for the Indian satellite programme INSAT-4. Such
German products warrant quality and the famous German workmanship. The equipment, or the C band travelling wave tube amplifier for the Indian GSAT-5,
German government plans to invest an additional EUR 6 billion towards R&D in
exemplifies Tesat's long-standing co-operation with India.49
the existing legislative period. The government will also allocate around EUR 15
The civil aviation sector in India has been marked by fast-paced change in the
billion for cutting-edge technology through the year 200947.
past few years, largely driven by liberalization, has enabled the participation of
European Patent Applications
private players. Aircraft manufacturer Airbus estimates India's demand at 1100
35000
30000 aircrafts, worth EUR 76.65 billion, over the next 20 years.
No. Of Patents
25000 40000
20000 Business Case

15000
10000 European plane maker Airbus plans to invest more than EUR 730 million in the
5000
Indian aviation industry over a period of next ten years. Airbus would invest in
0
2000 2001 2002 2003 2004 2005 2006
areas of training, a maintenance facility and a design and engineering center.50
USA Germany Japan France UK Italy
Both Germany and India could leverage each other's strength in the areas of
Source: European Patent Office aviation and space technology, by which India can access Germany's cutting
Based on data filed in reference to inventors residence.
edge aviation technology and German businesses could benefit from the
Cooperation in science, research and technology between India and Germany tremendous potential of the Indian Market.
dates back to the 1960s. Subsequently, several special arrangements between
German and Indian research organizations were signed, aimed at initiating and
implementing common research projects as well as the exchange of scientists.
47
Federal Ministry of Education and Research, Germany 48
Invest in Germany Website
Note: INR EUR and USD EUR conversion rate is average of 365 days of respective years 49
CLSA Report 2005
and current exchange rate for projections 50
Reuters, May 7, 2007
32 33
Information and Communication Technologies (ICT) Indian Government has accorded approval to the Special Incentive Package
Scheme to attract investments for setting up semiconductor fabrication and other
Germany has the largest ICT industry in Europe, with a sales volume of EUR 134
micro and nanotechnology manufacture industries in India.
billion in 2006, or 20.8 percent of Europe's total market share. Over 80 percent of
all innovations in areas of automotive, medical technology and logistics in A strong partnership between India and Germany in nanotechnology
Germany are driven by the ICT sector. With a volume of over EUR 57 billion, industrialization would be very important to bring cost effective nanotechnology
Germany is also among the largest exporters of ICT products and services products into the Indian market in the shortest possible lead-time.
worldwide. The German market offers immense potential for printed electronics There are possibilities for collaboration in terms of carrying out workshops,
and displays in Europe. In addition to this, it offers an unparalleled density of the exchange of scientists and experts, joint research programs, and the like in
world's leading suppliers for materials, components, and equipment across the science and technology. Collaborative research projects between India and
value chain for flat panel displays, OLED technology, printed electronics, and Germany in fundamental areas of science and technology offer great potential
RFID. Germany also offers a significant opportunity for microelectronics, which is given the competitive strength possessed by both counties.
largely driven by the strong internal demand in market segments such as
consumer electronics and automotive; as well as emerging technologies in
expanding fields of application such as displays or photovoltaic.51
ICT is one of the fastest growing segments of Indian industry both in terms of
production and exports. The Indian government has completely de-licensed the
electronics industry with the exception of aerospace and defense electronics.
With the liberalization in foreign investment, the ICT sector is attracting
considerable interest not only as a vast domestic market, but also as potential
production and sourcing base by international companies.
There is large scope for contract manufacturing of electronics and other high
definition technologies between Indian and German companies, given the vibrant
commerce between both economies.
Nanotechnology
Germany has established itself as a sophisticated nanotechnology player, with
the presence of more than 1,000 nanotech-players. The German automotive,
optical, chemical, and pharmaceutical industries have strong demand for
nanotech applications, as well as medical technologies and electronics sector
applications. The German nanotechnology field includes large corporations like
Infineon, DaimlerChrysler, Schott, Carl Zeiss, Siemens, Osram, Degussa, BASF,
Bayer, Metallgesellschaft and Henkel, apart from numerous small and mid-size
enterprises.
In 2006, the Indian nanotechnology was estimated to be around EUR 80 million

and was expected to grow at over 35 percent per year. The Nanotechnology
industry in India is largely at the exploratory stage with a number of large
organizations scouting for opportunities to exploit emerging technologies.
Availability of low cost technical skills and a rapidly expanding market has thrown
up a number of opportunities in different sectors. If synergies between
nanotechnology, biotechnology, semiconductors, and IT can be identified and
exploited, India stands to emerge as a leading player in the nano world. The
51
Invest In Germany Website and current exchange rate for projections
34 35
Information and Communication Technologies (ICT) Indian Government has accorded approval to the Special Incentive Package
Scheme to attract investments for setting up semiconductor fabrication and other
Germany has the largest ICT industry in Europe, with a sales volume of EUR 134
micro and nanotechnology manufacture industries in India.
billion in 2006, or 20.8 percent of Europe's total market share. Over 80 percent of
all innovations in areas of automotive, medical technology and logistics in A strong partnership between India and Germany in nanotechnology
Germany are driven by the ICT sector. With a volume of over EUR 57 billion, industrialization would be very important to bring cost effective nanotechnology
Germany is also among the largest exporters of ICT products and services products into the Indian market in the shortest possible lead-time.
worldwide. The German market offers immense potential for printed electronics There are possibilities for collaboration in terms of carrying out workshops,
and displays in Europe. In addition to this, it offers an unparalleled density of the exchange of scientists and experts, joint research programs, and the like in
world's leading suppliers for materials, components, and equipment across the science and technology. Collaborative research projects between India and
value chain for flat panel displays, OLED technology, printed electronics, and Germany in fundamental areas of science and technology offer great potential
RFID. Germany also offers a significant opportunity for microelectronics, which is given the competitive strength possessed by both counties.
largely driven by the strong internal demand in market segments such as
consumer electronics and automotive; as well as emerging technologies in
expanding fields of application such as displays or photovoltaic.51
ICT is one of the fastest growing segments of Indian industry both in terms of
production and exports. The Indian government has completely de-licensed the
electronics industry with the exception of aerospace and defense electronics.
With the liberalization in foreign investment, the ICT sector is attracting
considerable interest not only as a vast domestic market, but also as potential
production and sourcing base by international companies.
There is large scope for contract manufacturing of electronics and other high
definition technologies between Indian and German companies, given the vibrant
commerce between both economies.
Nanotechnology
Germany has established itself as a sophisticated nanotechnology player, with
the presence of more than 1,000 nanotech-players. The German automotive,
optical, chemical, and pharmaceutical industries have strong demand for
nanotech applications, as well as medical technologies and electronics sector
applications. The German nanotechnology field includes large corporations like
Infineon, DaimlerChrysler, Schott, Carl Zeiss, Siemens, Osram, Degussa, BASF,
Bayer, Metallgesellschaft and Henkel, apart from numerous small and mid-size
enterprises.
In 2006, the Indian nanotechnology was estimated to be around EUR 80 million

and was expected to grow at over 35 percent per year. The Nanotechnology
industry in India is largely at the exploratory stage with a number of large
organizations scouting for opportunities to exploit emerging technologies.
Availability of low cost technical skills and a rapidly expanding market has thrown
up a number of opportunities in different sectors. If synergies between
nanotechnology, biotechnology, semiconductors, and IT can be identified and
exploited, India stands to emerge as a leading player in the nano world. The
51
Invest In Germany Website and current exchange rate for projections
34 35
The German economic model relies on the small scale sector having more than
SME – SME Cooperation three million SMEs, which employ 70 percent of the wage-earners54. SMEs
generate around 33 percent of the industrial turnover. In fact, 95 percent of
Overview
enterprises in Germany in the field of chemical industry, machine building
Globally, Small and Medium Enterprises (SMEs) have played a significant role in industry, manufacturing of motor cars, manufacturing electrical and optical
the development of the country’s economy. Developing economies are
instruments belong to small and medium size enterprises sector55.
increasing their focus on the SME segment as they contribute to
Thus, SMEs contribute to the national economic growth, regional development,
entrepreneurship, innovation and employment. 52 According to a report by the
technological innovation, and export market expansion. However, there is still
World Bank, in low-income countries with Gross National Product (GNP) per
room for growth in terms of bilateral trade agreements, enhanced credit support,
capita between USD 100 and USD 500, SMEs account for over 60 percent of
support for technological up-gradation and export promotion and marketing
GDP and 70 percent of total employment. In the middle-income countries, they
assistance.
produce close to 70 percent of GDP and 95 percent of the total employment.
Therefore, it becomes critical that India and Germany seek alliances and
SME Definition - India
partnerships between their respective SMEs. Governments can approach
Enterprise Engaged in Manufacturing / Engaged In Providing/ Remarks
domestic and foreign corporations to design tools to provide SMEs with specific
Preservation of Goods Rendering of Services
services. Such partnerships can take various forms, including training facilities,
(incl. Processing Units)
technology centers, research, investment funds, start-ups, etc
Micro Enterprise Not to exceed INR 2.5 million Not to exceed INR 1 million 1. Separate threshold
investment limits
Small Enterprise More than2.5 million but does More than INR 1 million proposed by the Act for
not exceed INR 50 million but does not exceed Manufacturing and
INR 20 million Services Sectors.
Medium Enterprise More than INR 50 million More than INR 20 million 2. Micro Enterprises newly
but does not exceed but does not exceed introduced under both the
INR 100 million INR 50 million sectors.
Source: http://www.bankofindia.com
India has nearly three million SMEs, which account for almost 50 percent of the
industrial output. In addition to this, these SMEs are an essential employment-
generating sector with 50 percent of the private sector employment, creating 30-
40 percent of value addition to manufacturing, and contributing close to 40
percent to Indian GDP. They produce over 8,000 different products, ranging from
simple items to high-tech products for both domestic and international markets53.
SME Definition - Germany
Enterprise category Headcount Turnover or Balance sheet total
medium-sized < 250 < EUR 50 million < EUR 43 million
small < 50 < EUR 10 million < Euro10 million
micro < 10 < EUR 2 million < EUR 2 million
Source: http://ec.europa.eu
52
World Bank special report A Better Investment Climate for Everyone, March 2005 54
53 SMEToolKit.org Germany Overview
Crisil Young Thought Leader Series 2006 - How can Indian SMEs becomes export 55
competitive? FICCI - Indo-German SME Congress: Mittelstand goes to India
36 37
The German economic model relies on the small scale sector having more than
SME – SME Cooperation three million SMEs, which employ 70 percent of the wage-earners54. SMEs
generate around 33 percent of the industrial turnover. In fact, 95 percent of
Overview
enterprises in Germany in the field of chemical industry, machine building
Globally, Small and Medium Enterprises (SMEs) have played a significant role in industry, manufacturing of motor cars, manufacturing electrical and optical
the development of the country’s economy. Developing economies are
instruments belong to small and medium size enterprises sector55.
increasing their focus on the SME segment as they contribute to
Thus, SMEs contribute to the national economic growth, regional development,
entrepreneurship, innovation and employment. 52 According to a report by the
technological innovation, and export market expansion. However, there is still
World Bank, in low-income countries with Gross National Product (GNP) per
room for growth in terms of bilateral trade agreements, enhanced credit support,
capita between USD 100 and USD 500, SMEs account for over 60 percent of
support for technological up-gradation and export promotion and marketing
GDP and 70 percent of total employment. In the middle-income countries, they
assistance.
produce close to 70 percent of GDP and 95 percent of the total employment.
Therefore, it becomes critical that India and Germany seek alliances and
SME Definition - India
partnerships between their respective SMEs. Governments can approach
Enterprise Engaged in Manufacturing / Engaged In Providing/ Remarks
domestic and foreign corporations to design tools to provide SMEs with specific
Preservation of Goods Rendering of Services
services. Such partnerships can take various forms, including training facilities,
(incl. Processing Units)
technology centers, research, investment funds, start-ups, etc
Micro Enterprise Not to exceed INR 2.5 million Not to exceed INR 1 million 1. Separate threshold
investment limits
Small Enterprise More than2.5 million but does More than INR 1 million proposed by the Act for
not exceed INR 50 million but does not exceed Manufacturing and
INR 20 million Services Sectors.
Medium Enterprise More than INR 50 million More than INR 20 million 2. Micro Enterprises newly
but does not exceed but does not exceed introduced under both the
INR 100 million INR 50 million sectors.
Source: http://www.bankofindia.com
India has nearly three million SMEs, which account for almost 50 percent of the
industrial output. In addition to this, these SMEs are an essential employment-
generating sector with 50 percent of the private sector employment, creating 30-
40 percent of value addition to manufacturing, and contributing close to 40
percent to Indian GDP. They produce over 8,000 different products, ranging from
simple items to high-tech products for both domestic and international markets53.
SME Definition - Germany
Enterprise category Headcount Turnover or Balance sheet total
medium-sized < 250 < EUR 50 million < EUR 43 million
small < 50 < EUR 10 million < Euro10 million
micro < 10 < EUR 2 million < EUR 2 million
Source: http://ec.europa.eu
52
World Bank special report A Better Investment Climate for Everyone, March 2005 54
53 SMEToolKit.org Germany Overview
Crisil Young Thought Leader Series 2006 - How can Indian SMEs becomes export 55
competitive? FICCI - Indo-German SME Congress: Mittelstand goes to India
36 37
Contributed 2.1 percent to GDP in 2006 (EUR 13.3 billion); and is estimated
Tourism l
to touch EUR 21.3 billion by 2016
Overview l Travel and Tourism demand in India is projected to grow at an annual rate of
8.8 percent till 2020
Travel and tourism is a high priority sector for every country, as it contributes
substantially to the economic development of the country and encompasses l 5.4 percent of total employment; ( one in every 18 jobs)
transport, accommodation, catering, recreation and other ancillary services for l Third fastest growing travel and tourism industry in the world.
the tourists. This sector is also one of the major employment generators. Tourism
l Rated in the Top Ten travel destinations in the world by travel and tourism
has been identified as one of the world's largest industries with an average
journal Conde Nast Traveler
annual growth rate of over 5 percent over the past twenty years.
l Rated among the Top Five travel destinations in the world by Lonely Planet
India is emerging as a major travel and tourism player, both for inbound and
outbound travel. In 2006, India witnessed a substantial year-on-year growth of Germany is one of the leading nations in the European hotels and motels
around 13 percent in foreign tourist arrivals, standing at 4.4 million, and 11 industry, with a 16.4 percent share of the regional industry's value57 . In 2006,
percent growth in outbound travel (7 million passengers). With a strong economic Germany's international tourism receipts stood EUR 25 billion, with an annual
outlook, favorable demographics, rising income levels coupled with liberalization growth rate of 6 percent.
of aviation sector and easing of regulations on foreign investment the market is
Germany- International tourism receipts (Euro Million)
poised for significant growth.
30000
Visitor arrivals in India (2005) 24894
23496
UK
25000 21859
20576 20328 20546
Euro Million
16%
20000
15000
Others 10000
45% US
16% 5000
0
Canada
4% 2001 2002 2003 2004 2005 2006
Singapore France
2% 4% Indo- German ties
Australia Sri Lanka
2% 3% Indo-German foreign trade reached EUR 10 billion for the first time in 200658.
Malaysia Germany
2% Their continuous support and participation in each others success will go a long
Japan 3%
3% way in strengthening economic ties.
India was the partner country at ITB Berlin 2007, one of the world's largest travel
and trade shows, where it was promoted as a preferred destination. GOI's global
India International tourism receipts56 (Euro Million)
marketing campaign, 'Incredible India' reached out to a large audience of travel
6000
5130 industry representatives, decision makers, the media and potential travelers.
5000 4592
Euro Million
3838 German tourism and shipping company TUI AG, is planning to enter into the
4000 3398
3101 3123 leisure hotels space in India in partnership with a local company. TUI is also
3000
looking at sectors like chartered aviation and shipping.
2000
In the near future, German carrier Lufthansa plans to have daily flights to India.
1000
The Indian market is growing steadily, with a steep and continuous rise in the
0 number of corporate travelers; this is the prime reason why Lufthansa is
2001 2002 2003 2004 2005 2006
57
56
Datamonitor report- Hotels & Motels in Germany- December 2006
India travel and tourism report by WTTC, Feb 06 58
Chamber of Commerce, Mumbai- Doc- ITB Messe Berlin
38 39
Contributed 2.1 percent to GDP in 2006 (EUR 13.3 billion); and is estimated
Tourism l
to touch EUR 21.3 billion by 2016
Overview l Travel and Tourism demand in India is projected to grow at an annual rate of
8.8 percent till 2020
Travel and tourism is a high priority sector for every country, as it contributes
substantially to the economic development of the country and encompasses l 5.4 percent of total employment; ( one in every 18 jobs)
transport, accommodation, catering, recreation and other ancillary services for l Third fastest growing travel and tourism industry in the world.
the tourists. This sector is also one of the major employment generators. Tourism
l Rated in the Top Ten travel destinations in the world by travel and tourism
has been identified as one of the world's largest industries with an average
journal Conde Nast Traveler
annual growth rate of over 5 percent over the past twenty years.
l Rated among the Top Five travel destinations in the world by Lonely Planet
India is emerging as a major travel and tourism player, both for inbound and
outbound travel. In 2006, India witnessed a substantial year-on-year growth of Germany is one of the leading nations in the European hotels and motels
around 13 percent in foreign tourist arrivals, standing at 4.4 million, and 11 industry, with a 16.4 percent share of the regional industry's value57 . In 2006,
percent growth in outbound travel (7 million passengers). With a strong economic Germany's international tourism receipts stood EUR 25 billion, with an annual
outlook, favorable demographics, rising income levels coupled with liberalization growth rate of 6 percent.
of aviation sector and easing of regulations on foreign investment the market is
Germany- International tourism receipts (Euro Million)
poised for significant growth.
30000
Visitor arrivals in India (2005) 24894
23496
UK
25000 21859
20576 20328 20546
Euro Million
16%
20000
15000
Others 10000
45% US
16% 5000
0
Canada
4% 2001 2002 2003 2004 2005 2006
Singapore France
2% 4% Indo- German ties
Australia Sri Lanka
2% 3% Indo-German foreign trade reached EUR 10 billion for the first time in 200658.
Malaysia Germany
2% Their continuous support and participation in each others success will go a long
Japan 3%
3% way in strengthening economic ties.
India was the partner country at ITB Berlin 2007, one of the world's largest travel
and trade shows, where it was promoted as a preferred destination. GOI's global
India International tourism receipts56 (Euro Million)
marketing campaign, 'Incredible India' reached out to a large audience of travel
6000
5130 industry representatives, decision makers, the media and potential travelers.
5000 4592
Euro Million
3838 German tourism and shipping company TUI AG, is planning to enter into the
4000 3398
3101 3123 leisure hotels space in India in partnership with a local company. TUI is also
3000
looking at sectors like chartered aviation and shipping.
2000
In the near future, German carrier Lufthansa plans to have daily flights to India.
1000
The Indian market is growing steadily, with a steep and continuous rise in the
0 number of corporate travelers; this is the prime reason why Lufthansa is
2001 2002 2003 2004 2005 2006
57
56
Datamonitor report- Hotels & Motels in Germany- December 2006
India travel and tourism report by WTTC, Feb 06 58
Chamber of Commerce, Mumbai- Doc- ITB Messe Berlin
38 39
increasingly focusing on the Indian market. To attract passengers, the airline has
introduced new services, such as Bengali cuisine on board.
Transport and Logistics
Taj Hotels Resorts and Palaces, one of the leading hospitality groups in India, is Indian Logistic Market
embarking on a EUR 1.2 billion expansion and is looking at properties in France,
Germany and Italy The Indian logistics sector is witnessing significant growth on the back of robust
economic expansion (the Indian economy grew by 9.4 percent in 2007) and
Opportunities in India strong growth in manufacturing sector. The logistics sector which is at present,
Hotel projects: The hospitality industry in India has been growing at breakneck at an inflection point is under going a major transformation led by the emergence
speed and at present, there is an immediate requirement of approximately of global players, increasing infrastructure expenditure and advancing
100,000 hotel rooms. India is also hosting 2010 Commonwealth Games, and is technological sophistication.
one of the four co-organizers of World Cup Cricket 2011. For the investments to
flow in and plug the room shortage, the Indian Government has announced a Growth drivers for the Logistic sector in India
selective five year tax holiday for convention centers and hotels to be set up in
Delhi and National Capital Region between 2007 and 2010.
Increased FDI
Auto
Entertainment and Theme parks: India's burgeoning middle class holds a lot of Auto components
Electronics
promise for the investors in the family entertainment and amusement sector. manufacturing Introduction of
VAT
Coupled with the fact that 35 percent of India's population is below the age of 15,
this sub-sector could grow significantly in the long term. A few states in India also GDP growth
Driven by
manufacturing Rise of 3PL
offer incentives for the development of amusement parks, by way of relief from Logistics warehousing
Higher trade + Sector cold chain
entertainment tax and income tax. EXIM business
Corporate travel agencies and online travel portals: The online travel industry
Infrastructure
grew at 126 percent from a base of EUR 237 million in 2005 to EUR 634 in 2006. Road creation Growth drives
Port capacity Organized retail
Rail network Agri processing
In 2007, it is expected to record a 56 percent growth to be a EUR 990 million Air cargo
industry59. Global companies are exploring India-specific marketing options and
developing synergies with market players.
Source: Edelweiss research
Opportunities in Germany India has world's second largest road and railways network with 3.3 million
Spa and Ayurveda centers kilometers (km) of road and over 63,332 route kilometers (RKM) of railways,
Traditional Ayurveda healing therapies have been offered in India for centuries. comprising broad gauge, metre gauge and narrow gauge.
German Tourists visiting India are particularly interested in these authentic Almost all the segments of this sector are attracting significant investments. The
treatments and there is a growing demand for wellness and Ayurveda packages. Committee on Infrastructure, headed by the Prime Minister has estimated an
This gives a lot of scope to the Indian Spas and Ayurveda centers, to set up
investment of EUR 39 billion for modernization and up gradation of highways;
businesses in Germany and provide these unique services in their country.
EUR 7 billion for civil aviation; EUR 9 billion for ports; and EUR 54 billion for the
Conclusion railways. These investments are to be achieved through a combination of public
Indo-German ties should be revived to give tourism a boost. Germany has the investment, Public Private Partnerships (PPPs) and exclusive private
potential, along with neighboring countries like France, Spain and Italy for tourist investments, wherever feasible. This provides significant opportunities for
inflow to and from India. An increasing number of upwardly mobile Indians travel players across the infrastructure and logistics value chain.
abroad for leisure and business purposes. With the economy doing well and the
German Logistic Market
easy availability of forex, visas and flights, the market is poised for much growth.
Travel and hospitality-related chains are preparing to grab a share of this growing Germany has the EU's largest logistics market and is the country's third largest
market. After tourism boards and airlines, it is the turn of global hotel chains to industry after the automobile and electronic sectors. Germany has one of the
undertake initiatives to attract the Indian traveler. best infrastructures in Europe. Germany's highway network is twice the EU
59
average and has Europe's busiest cargo airport, Frankfurt. The German rail
Report by PhoCus Right
Source: EIU network alone encompasses 40,327 kilometers of track (compared to less than
40 41
increasingly focusing on the Indian market. To attract passengers, the airline has
introduced new services, such as Bengali cuisine on board.
Transport and Logistics
Taj Hotels Resorts and Palaces, one of the leading hospitality groups in India, is Indian Logistic Market
embarking on a EUR 1.2 billion expansion and is looking at properties in France,
Germany and Italy The Indian logistics sector is witnessing significant growth on the back of robust
economic expansion (the Indian economy grew by 9.4 percent in 2007) and
Opportunities in India strong growth in manufacturing sector. The logistics sector which is at present,
Hotel projects: The hospitality industry in India has been growing at breakneck at an inflection point is under going a major transformation led by the emergence
speed and at present, there is an immediate requirement of approximately of global players, increasing infrastructure expenditure and advancing
100,000 hotel rooms. India is also hosting 2010 Commonwealth Games, and is technological sophistication.
one of the four co-organizers of World Cup Cricket 2011. For the investments to
flow in and plug the room shortage, the Indian Government has announced a Growth drivers for the Logistic sector in India
selective five year tax holiday for convention centers and hotels to be set up in
Delhi and National Capital Region between 2007 and 2010.
Increased FDI
Auto
Entertainment and Theme parks: India's burgeoning middle class holds a lot of Auto components
Electronics
promise for the investors in the family entertainment and amusement sector. manufacturing Introduction of
VAT
Coupled with the fact that 35 percent of India's population is below the age of 15,
this sub-sector could grow significantly in the long term. A few states in India also GDP growth
Driven by
manufacturing Rise of 3PL
offer incentives for the development of amusement parks, by way of relief from Logistics warehousing
Higher trade + Sector cold chain
entertainment tax and income tax. EXIM business
Corporate travel agencies and online travel portals: The online travel industry
Infrastructure
grew at 126 percent from a base of EUR 237 million in 2005 to EUR 634 in 2006. Road creation Growth drives
Port capacity Organized retail
Rail network Agri processing
In 2007, it is expected to record a 56 percent growth to be a EUR 990 million Air cargo
industry59. Global companies are exploring India-specific marketing options and
developing synergies with market players.
Source: Edelweiss research
Opportunities in Germany India has world's second largest road and railways network with 3.3 million
Spa and Ayurveda centers kilometers (km) of road and over 63,332 route kilometers (RKM) of railways,
Traditional Ayurveda healing therapies have been offered in India for centuries. comprising broad gauge, metre gauge and narrow gauge.
German Tourists visiting India are particularly interested in these authentic Almost all the segments of this sector are attracting significant investments. The
treatments and there is a growing demand for wellness and Ayurveda packages. Committee on Infrastructure, headed by the Prime Minister has estimated an
This gives a lot of scope to the Indian Spas and Ayurveda centers, to set up
investment of EUR 39 billion for modernization and up gradation of highways;
businesses in Germany and provide these unique services in their country.
EUR 7 billion for civil aviation; EUR 9 billion for ports; and EUR 54 billion for the
Conclusion railways. These investments are to be achieved through a combination of public
Indo-German ties should be revived to give tourism a boost. Germany has the investment, Public Private Partnerships (PPPs) and exclusive private
potential, along with neighboring countries like France, Spain and Italy for tourist investments, wherever feasible. This provides significant opportunities for
inflow to and from India. An increasing number of upwardly mobile Indians travel players across the infrastructure and logistics value chain.
abroad for leisure and business purposes. With the economy doing well and the
German Logistic Market
easy availability of forex, visas and flights, the market is poised for much growth.
Travel and hospitality-related chains are preparing to grab a share of this growing Germany has the EU's largest logistics market and is the country's third largest
market. After tourism boards and airlines, it is the turn of global hotel chains to industry after the automobile and electronic sectors. Germany has one of the
undertake initiatives to attract the Indian traveler. best infrastructures in Europe. Germany's highway network is twice the EU
59
average and has Europe's busiest cargo airport, Frankfurt. The German rail
Report by PhoCus Right
Source: EIU network alone encompasses 40,327 kilometers of track (compared to less than
40 41
32,000 in France). The country's highway provides 11,978 kilometers of navigable LOCAL BUSINESS ENVIRONMENT AND
territory60.
Germany: Leader in transport infrastructure in Europe
50,000
What do Indian and German companies operating cross-
Total Railways
Total Highways border want to see reviewed?
40,327
Inland Watertransport
40,000
KPMG undertook a survey with some select large Indian and German
31,852 companies, operating cross-border in India and Germany to assess the level of
30,000 their satisfaction with the local regulatory and business environment.
All companies listed the respective local market, as being the most important
20,000 17,128
16,014
consideration behind their cross-border presence. Whereas German companies
11,938
10,000 8,317
seem to be increasingly investing in India also from the perspective of creating a
7,450
6,439
5,374
5,235
3,344 3,228
credible sourcing base for their regional and global supply needs, the added
0 consideration driving the Indian foray into Germany is access to world-class
Germany France UK Italy
In sq km: 357,021 547,030 244,820 301,230 technology.
Interestingly, most German companies interviewed seemed aware of the

Source: Invest in Germany
background and issues that they would have to face, well before they actually
Germany is home to the leading global logistics players. German company
invested in India. Consequently, they did factor the need to partner with local
Deutsche Post World Net, which includes DHL, is the world leader in logistics.
Indian parties and seek the assistance of good local advisors when devising their
The industry is also strongly influenced by mid-sized companies which offer
approach / business strategies for India. The common use of the English
expansive portfolios of logistics services.
language in Indian law, regulations, contracts and business made their Indian
Opportunities in Germany and India foray relatively simpler when compared to other countries with new and emerging
markets.
Going forward, both India and Germany are likely to be key beneficiaries of the
rising Indo-Europe trade. Germany's central location in the EU and well- The majority of German investments in India has been in green-field projects and
developed infrastructure is encouraging Indian logistics players to make Germany manufacturing capacities. On the other hand, except for the information
a distribution center for their European operations. Similarly, India's emergence technology and software companies, most Indian investments in Germany have
as a competitive production and sourcing hub has global logistics players to been by way of acquisitions of existing companies. Despite the continuous
establish an India presence. marketing conducted by a few German states to attract investment, Indian green-
field investments in Germany have been extremely gradual when compared with
German investments in India. The issues of language and differences in the
work-culture in Germany were cited as the two road-blocks in the free-flow of
Indian green-field investments in Germany.
Indian companies in Germany would prefer a review of …

Investment regulations
1 Merger regulation at the European Union (EU) Level: Though the intent of
the EU (to regulate the process of business acquisitions within the EU) may
seem entirely justified, the information sought by the authorities from
acquiring companies about the competitive position in that industry within the
EU seems fairly subjective and difficult to obtain. Particularly considering the
weak research coverage publicly available on businesses in the EU, while
60
Invest in Germany - Germany Europe's logistics hub trying to comply with these requirements the respondents may unknowingly
42 43
32,000 in France). The country's highway provides 11,978 kilometers of navigable LOCAL BUSINESS ENVIRONMENT AND
territory60.
Germany: Leader in transport infrastructure in Europe
50,000
What do Indian and German companies operating cross-
Total Railways
Total Highways border want to see reviewed?
40,327
Inland Watertransport
40,000
KPMG undertook a survey with some select large Indian and German
31,852 companies, operating cross-border in India and Germany to assess the level of
30,000 their satisfaction with the local regulatory and business environment.
All companies listed the respective local market, as being the most important
20,000 17,128
16,014
consideration behind their cross-border presence. Whereas German companies
11,938
10,000 8,317
seem to be increasingly investing in India also from the perspective of creating a
7,450
6,439
5,374
5,235
3,344 3,228
credible sourcing base for their regional and global supply needs, the added
0 consideration driving the Indian foray into Germany is access to world-class
Germany France UK Italy
In sq km: 357,021 547,030 244,820 301,230 technology.
Interestingly, most German companies interviewed seemed aware of the

Source: Invest in Germany
background and issues that they would have to face, well before they actually
Germany is home to the leading global logistics players. German company
invested in India. Consequently, they did factor the need to partner with local
Deutsche Post World Net, which includes DHL, is the world leader in logistics.
Indian parties and seek the assistance of good local advisors when devising their
The industry is also strongly influenced by mid-sized companies which offer
approach / business strategies for India. The common use of the English
expansive portfolios of logistics services.
language in Indian law, regulations, contracts and business made their Indian
Opportunities in Germany and India foray relatively simpler when compared to other countries with new and emerging
markets.
Going forward, both India and Germany are likely to be key beneficiaries of the
rising Indo-Europe trade. Germany's central location in the EU and well- The majority of German investments in India has been in green-field projects and
developed infrastructure is encouraging Indian logistics players to make Germany manufacturing capacities. On the other hand, except for the information
a distribution center for their European operations. Similarly, India's emergence technology and software companies, most Indian investments in Germany have
as a competitive production and sourcing hub has global logistics players to been by way of acquisitions of existing companies. Despite the continuous
establish an India presence. marketing conducted by a few German states to attract investment, Indian green-
field investments in Germany have been extremely gradual when compared with
German investments in India. The issues of language and differences in the
work-culture in Germany were cited as the two road-blocks in the free-flow of
Indian green-field investments in Germany.
Indian companies in Germany would prefer a review of …

Investment regulations
1 Merger regulation at the European Union (EU) Level: Though the intent of
the EU (to regulate the process of business acquisitions within the EU) may
seem entirely justified, the information sought by the authorities from
acquiring companies about the competitive position in that industry within the
EU seems fairly subjective and difficult to obtain. Particularly considering the
weak research coverage publicly available on businesses in the EU, while
60
Invest in Germany - Germany Europe's logistics hub trying to comply with these requirements the respondents may unknowingly
42 43
end up violating anti-trust regulations on discretionary data on companies. 6 Carry-forward of accumulated losses: There is no time-limit over which
The extent of data required as per the EU Merger regulation may have to be accumulated losses can be carried-forward for set-off against future profits of
appropriately reviewed. a company in Germany. The German tax regulation however, restricts the
Commercial considerations set-off each year only to the extent of that year's profit aggregating to the first
EUR 1 million and 60 percent of the balance. In order to promote foreign
2 Non-Tariff Barriers: The production facilities of registered exporters from
companies from salvaging German companies in distress, it would be
the Indian pharmaceutical industry are subjected to periodic EU inspections
desirable to allow losses in German companies with foreign investment to
and analyses. However, every time products manufactured by such facilities
set-off future profits without restrictions.
are imported in Germany, they are again subjected to a re-analysis test.
Despite the mandatory requirement in German pharmaceutical companies to 7 Tax filing, compliance and administration: The German tax system entails
have qualified personnel that can authorize the release of products for sale, a lot of paperwork and compliances that appears fairly complex and
the re-analysis tests for selling imported pharmaceutical products is required unnecessarily compels companies to seek the services of local professional
to be carried out by external agencies in Germany. This process is extremely agencies. For a better understanding of the tax obligations, it may be
time consuming and can affect the launch strategies particularly for products worthwhile for the German tax authorities to also provide literature and
going off-patents. The German authorities may have to consider allowing information on the local tax laws, systems and procedures in the English
free imports of products from facilities that in any case are subjected to language.
periodic on-ground inspection by German authorities. 8 Thin-capitalization rules: Buyers of businesses in Germany are
Indirect taxes and duties increasingly doing so from the perspective of establishing a foot-print in the
German market. The importance of increasing the capital required to grow
3 Value Added Tax (VAT): The emerging scenario of companies establishing
German businesses cannot be undermined. The thin-capitalization rules
a pan-EU presence is likely to increasingly see a holding company or
however, are an impediment for businesses to raise adequate debt in
special-purpose company being set up in one country and the operating
meeting that objective. Unlike in several other EU countries, Germany does
company being set up in another country. In cases where a holding company
not even allow notional tax-breaks attributable to equity investment in
has to incur VAT on purchase of goods or services in Germany, in the
businesses. There seems a merit in reviewing this to encourage businesses
absence of an operation it becomes difficult to set that off against any like
(especially those owned by foreign entities) to commit increasing capital in
Tax that is normally collected on sale revenues. There is a need for the
Germany. This problem is likely to aggravate under the future earnings
German authorities to consider allowing such cases to either claim a refund
stripping rule, where notwithstanding the level of outstanding debt, the
of such VAT; or carry it forward indefinitely, till such time that some revenue
admissible deduction of interest for tax purposes would be restricted to a
related tax can be generated; or incorporate a treaty with other EU countries
certain percentage of the business income.
to allow for a cross-border set-off.
Expatriate Issues
Corporate taxes
9 Wage tax regulation: With respect to short-term expatriate employees, the
4 Transfer pricing: The industry benchmarking to determine fair arms-length
German tax on notional income (shadow income) items earned or accrued in
pricing in Germany is entirely based on historical local-cost structures that in
India could be imputed based on a flat-rate charged on the expatriate
the present context, seem high. In view of increasing cost arbitrage flowing
employee's German income. Computing this on an actual basis ends up
into German businesses due to global integration, the cost-plus based
being too subjective and implicitly expensive to administer.
transfer pricing concept of local benchmarking in Germany may have to be
appropriately reviewed. 10 Social security deduction: With respect to short-term expatriate
employees, the mandatory requirement to contribute towards German social
5 Investment incentives: An increasing number of countries within the EU are
security needs to be entirely done away with. Germany and India should
offering a host of incentives for foreign investors investing capital and
have a social security treaty between them to avoid unnecessary deductions
resources. The investment incentive packages offered in Germany however
from short-term expatriate salaries towards local social security
seem much lower than when compared to other countries in the EU and may
contributions.
have to be objectively reviewed.
11 Unemployment insurance premium: With respect to short-term expatriate
employees, the mandatory contribution towards German unemployment
44 45
end up violating anti-trust regulations on discretionary data on companies. 6 Carry-forward of accumulated losses: There is no time-limit over which
The extent of data required as per the EU Merger regulation may have to be accumulated losses can be carried-forward for set-off against future profits of
appropriately reviewed. a company in Germany. The German tax regulation however, restricts the
Commercial considerations set-off each year only to the extent of that year's profit aggregating to the first
EUR 1 million and 60 percent of the balance. In order to promote foreign
2 Non-Tariff Barriers: The production facilities of registered exporters from
companies from salvaging German companies in distress, it would be
the Indian pharmaceutical industry are subjected to periodic EU inspections
desirable to allow losses in German companies with foreign investment to
and analyses. However, every time products manufactured by such facilities
set-off future profits without restrictions.
are imported in Germany, they are again subjected to a re-analysis test.
Despite the mandatory requirement in German pharmaceutical companies to 7 Tax filing, compliance and administration: The German tax system entails
have qualified personnel that can authorize the release of products for sale, a lot of paperwork and compliances that appears fairly complex and
the re-analysis tests for selling imported pharmaceutical products is required unnecessarily compels companies to seek the services of local professional
to be carried out by external agencies in Germany. This process is extremely agencies. For a better understanding of the tax obligations, it may be
time consuming and can affect the launch strategies particularly for products worthwhile for the German tax authorities to also provide literature and
going off-patents. The German authorities may have to consider allowing information on the local tax laws, systems and procedures in the English
free imports of products from facilities that in any case are subjected to language.
periodic on-ground inspection by German authorities. 8 Thin-capitalization rules: Buyers of businesses in Germany are
Indirect taxes and duties increasingly doing so from the perspective of establishing a foot-print in the
German market. The importance of increasing the capital required to grow
3 Value Added Tax (VAT): The emerging scenario of companies establishing
German businesses cannot be undermined. The thin-capitalization rules
a pan-EU presence is likely to increasingly see a holding company or
however, are an impediment for businesses to raise adequate debt in
special-purpose company being set up in one country and the operating
meeting that objective. Unlike in several other EU countries, Germany does
company being set up in another country. In cases where a holding company
not even allow notional tax-breaks attributable to equity investment in
has to incur VAT on purchase of goods or services in Germany, in the
businesses. There seems a merit in reviewing this to encourage businesses
absence of an operation it becomes difficult to set that off against any like
(especially those owned by foreign entities) to commit increasing capital in
Tax that is normally collected on sale revenues. There is a need for the
Germany. This problem is likely to aggravate under the future earnings
German authorities to consider allowing such cases to either claim a refund
stripping rule, where notwithstanding the level of outstanding debt, the
of such VAT; or carry it forward indefinitely, till such time that some revenue
admissible deduction of interest for tax purposes would be restricted to a
related tax can be generated; or incorporate a treaty with other EU countries
certain percentage of the business income.
to allow for a cross-border set-off.
Expatriate Issues
Corporate taxes
9 Wage tax regulation: With respect to short-term expatriate employees, the
4 Transfer pricing: The industry benchmarking to determine fair arms-length
German tax on notional income (shadow income) items earned or accrued in
pricing in Germany is entirely based on historical local-cost structures that in
India could be imputed based on a flat-rate charged on the expatriate
the present context, seem high. In view of increasing cost arbitrage flowing
employee's German income. Computing this on an actual basis ends up
into German businesses due to global integration, the cost-plus based
being too subjective and implicitly expensive to administer.
transfer pricing concept of local benchmarking in Germany may have to be
appropriately reviewed. 10 Social security deduction: With respect to short-term expatriate
employees, the mandatory requirement to contribute towards German social
5 Investment incentives: An increasing number of countries within the EU are
security needs to be entirely done away with. Germany and India should
offering a host of incentives for foreign investors investing capital and
have a social security treaty between them to avoid unnecessary deductions
resources. The investment incentive packages offered in Germany however
from short-term expatriate salaries towards local social security
seem much lower than when compared to other countries in the EU and may
contributions.
have to be objectively reviewed.
11 Unemployment insurance premium: With respect to short-term expatriate
employees, the mandatory contribution towards German unemployment
44 45
insurance fund needs to be entirely done away with. The German work 17 Work restriction: The work permit issued to expatriate employees is limited
permit rules clearly outline the need for the expatriate employee to leave for employment within the German state that it is issued for. This restriction
Germany in the event of his ceasing to be in employment of the sponsor affects mobility of employees to work on projects across Germany and
entity. This rules out any possibility of such an expatriate being entitled to should be reviewed.
unemployment insurance benefit in Germany. 18 Green card: The process of erstwhile Green cards issued by the German
12 Health insurance: Indian companies with a global insurance plan for its immigration authorities had been fairly effective and fast, when compared to
worldwide employees should have the liberty of deciding whether their the present work permits and should be revived.
employees have public or private health insurance in Germany. Most Indian 19 Temporary work permit: As is the case in Switzerland, Germany too could
companies with a diverse international presence have a global insurance consider issuing four-month work permits especially for short term assignees
policy cover, entitling its employees to a wide range of benefits at competitive working on projects in the information technology industry.
prices. In comparison, the public insurance premium in Germany is very
Labor laws
expensive.
20 Employee lay-offs: Deliberations with labor Works Council are often
13 Pension insurance: The procedure to apply for reimbursement of
subjective and unproductive, unnecessarily delaying processes. There is a
employee's pension contributions with respect to expatriate assignees, not
need to clearly outline guidelines for employers to follow when laying off
contributing to the German pension fund for more than 59 calendar months
people, as is the case with several other countries in Europe.
may be unduly long. Applications for reimbursement can be filed only after
the lapse of two years from the date of the assignee leaving Germany. The 21 Notice period: Long-serving employees leaving employment at their own will
reimbursement procedure needs to be simplified and expedited and also have to compulsorily follow a three-month notice period that adversely
provide for reimbursement of employer's contribution. impacts productivity for the current employer (since he cannot trust the
outgoing employee with work) and also for the new employer (since a
Accounting Issues
prospective employee cannot be held responsible for work before officially
14 Accounting standards: The German regulation requires all companies to commencing employment). The three-month notice period is unreasonable
make accounts as per local HGB accounting standards (German and needs to be urgently done away with.
Commercial Code). Most companies from India have migrated to IFRS
22 Social ranking: The social ranking regulation for lay-offs mandates newer
(International Financial Reporting Standards) and the specific German
employees having to be laid-off before the long-serving ones,
requirement only adds to the reporting work. Germany may have to allow
notwithstanding the experience and skill of such employees. This regulation
foreign companies to follow IFRS with respect to accounting for their German
appears arbitrary and unreasonable from a business perspective and needs
businesses towards an easier harmonization with global reporting integration
to be appropriately reviewed.
requirements.
23 Representation on company boards: The existing regulation empowers
Immigration laws
the Works Council to appoint two nominees on the board of companies. This
15 Business visa: Increasing cross-border trade and investment makes it regulation seems a little excessive and unreasonable from a business
necessary for businessmen to continuously travel internationally. Applying for perspective and needs to be appropriately reviewed.
a business visa separately for each visit becomes cumbersome and
expensive. It may be necessary for the visa authorities to issue longer-term German companies in India would prefer a review of …
visas for business travelers. Investment regulations
16 Work permit: The application and issues process for work-permit visa 1 Prior Venture Press Notes: These Press Notes require a certain category of
appears unclear, complicated and arbitrary. The process, requirements and Foreign Investors to obtain prior Government approval for new financial and
time taken seems to be inconsistent between different states in Germany. technical ventures if they had existing venture(s) with any Indian Partner as
There is a need for this process to be standard, transparent and time-bound. stipulated. However, these provisions need to be relaxed for technical
There is also the need for increasing automation to be introduced in the collaborations which do not involve any financial collaboration / commitment
process. The authorities should consider electronically transferring data from the Foreign Partner, as otherwise this process is quite cumbersome and
rather than relying on traditional post, to cut down on time delays. restricts free and competitive flow of technology to India.
46 47
insurance fund needs to be entirely done away with. The German work 17 Work restriction: The work permit issued to expatriate employees is limited
permit rules clearly outline the need for the expatriate employee to leave for employment within the German state that it is issued for. This restriction
Germany in the event of his ceasing to be in employment of the sponsor affects mobility of employees to work on projects across Germany and
entity. This rules out any possibility of such an expatriate being entitled to should be reviewed.
unemployment insurance benefit in Germany. 18 Green card: The process of erstwhile Green cards issued by the German
12 Health insurance: Indian companies with a global insurance plan for its immigration authorities had been fairly effective and fast, when compared to
worldwide employees should have the liberty of deciding whether their the present work permits and should be revived.
employees have public or private health insurance in Germany. Most Indian 19 Temporary work permit: As is the case in Switzerland, Germany too could
companies with a diverse international presence have a global insurance consider issuing four-month work permits especially for short term assignees
policy cover, entitling its employees to a wide range of benefits at competitive working on projects in the information technology industry.
prices. In comparison, the public insurance premium in Germany is very
Labor laws
expensive.
20 Employee lay-offs: Deliberations with labor Works Council are often
13 Pension insurance: The procedure to apply for reimbursement of
subjective and unproductive, unnecessarily delaying processes. There is a
employee's pension contributions with respect to expatriate assignees, not
need to clearly outline guidelines for employers to follow when laying off
contributing to the German pension fund for more than 59 calendar months
people, as is the case with several other countries in Europe.
may be unduly long. Applications for reimbursement can be filed only after
the lapse of two years from the date of the assignee leaving Germany. The 21 Notice period: Long-serving employees leaving employment at their own will
reimbursement procedure needs to be simplified and expedited and also have to compulsorily follow a three-month notice period that adversely
provide for reimbursement of employer's contribution. impacts productivity for the current employer (since he cannot trust the
outgoing employee with work) and also for the new employer (since a
Accounting Issues
prospective employee cannot be held responsible for work before officially
14 Accounting standards: The German regulation requires all companies to commencing employment). The three-month notice period is unreasonable
make accounts as per local HGB accounting standards (German and needs to be urgently done away with.
Commercial Code). Most companies from India have migrated to IFRS
22 Social ranking: The social ranking regulation for lay-offs mandates newer
(International Financial Reporting Standards) and the specific German
employees having to be laid-off before the long-serving ones,
requirement only adds to the reporting work. Germany may have to allow
notwithstanding the experience and skill of such employees. This regulation
foreign companies to follow IFRS with respect to accounting for their German
appears arbitrary and unreasonable from a business perspective and needs
businesses towards an easier harmonization with global reporting integration
to be appropriately reviewed.
requirements.
23 Representation on company boards: The existing regulation empowers
Immigration laws
the Works Council to appoint two nominees on the board of companies. This
15 Business visa: Increasing cross-border trade and investment makes it regulation seems a little excessive and unreasonable from a business
necessary for businessmen to continuously travel internationally. Applying for perspective and needs to be appropriately reviewed.
a business visa separately for each visit becomes cumbersome and
expensive. It may be necessary for the visa authorities to issue longer-term German companies in India would prefer a review of …
visas for business travelers. Investment regulations
16 Work permit: The application and issues process for work-permit visa 1 Prior Venture Press Notes: These Press Notes require a certain category of
appears unclear, complicated and arbitrary. The process, requirements and Foreign Investors to obtain prior Government approval for new financial and
time taken seems to be inconsistent between different states in Germany. technical ventures if they had existing venture(s) with any Indian Partner as
There is a need for this process to be standard, transparent and time-bound. stipulated. However, these provisions need to be relaxed for technical
There is also the need for increasing automation to be introduced in the collaborations which do not involve any financial collaboration / commitment
process. The authorities should consider electronically transferring data from the Foreign Partner, as otherwise this process is quite cumbersome and
rather than relying on traditional post, to cut down on time delays. restricts free and competitive flow of technology to India.
46 47
2 External Commercial Borrowings (ECB) Guidelines: The recent increase sale (products and services). It is therefore imperative that the Indian service
in local Indian interest rates have made it necessary for foreign companies tax regulation is made simple and easy to comply with. The Indian
in India to look at competitive international borrowing options. The stringent government may have to consider integrating Service Tax into VAT to
ECB Guidelines deny such companies the flexibility of accessing foreign harmonize it with global standards.
debt from parent/group entities or the international financial market at 9 Value Added Tax: The uncertainty relating to introduction and applicability of
commercially attractive terms. Considering the increasing need for Value Added Tax across Indian states, and the extent of sales tax liability
investment/capitalization of businesses in India, the regulations surrounding attributable to sales in certain states is a matter of grave concern and needs
ECB need to be reviewed and liberalized. to be expeditiously resolved. It has also been noticed that there is a lack of
Commercial considerations uniformity in the VAT laws prevalent in different States, leading to ambiguity
and difficulty in implementation for the businesses spread across the States.
3 Documentation: The extent of certifications and notarizations required in
Further, the tax credits are not available in case of inter state sales, thereby
the process of setting up an Indian entity needs an objective review. The
making it a cost to the transaction. There is a need for the system of Indian
Indian Authorities seem to insist on documents that are generally not insisted
taxes, collections and set-off to be harmonized with that of the EU, wherein
upon by similar Authorities in developed countries and which do not seem to
credits are ideally allowed even for transactions taking place within two
have much bearing on the process.
countries.
4 Product classification: The inconsistencies in classification of products as
10 Customs duty computation: The manner of computation of customs duty is
per different laws and regulations, make the approval and taxation
complex, particularly with frequent additions of new levies thereby making it
processes extremely complicated. There is an urgent need to streamline
difficult for companies to reliably assess the economic value of imports. The
classification of products in order to make the applicable regulatory
government should consider simplifying the process by subjecting imports to
processes simpler and transparent.
a flat rate of duty. While the customs duty rates have generally reduced, the
5 Insurance premium remittance: It is customary for global automotive incidence on imports in some cases (particularly for traders) continues to be
companies operating in India to buy liability insurance with respect to all high at around 34 percent.
vehicles sold locally. The extent of insurance is fairly large for any local
11 Custom duty payment: At present, the duty is required to be paid for each
Indian insurance company to cover it, thereby compelling such insurance to
import before the clearance of the imported goods. Often, the process of
be bought globally. The foreign remittance of such premium is not allowed as
releasing imported goods from custom-bonded warehouses gets delayed, till
per the Indian regulation. There is a need to consider such payment at least
the correct duties on them are calculated and paid. A system allowing the
from the Export Earners Foreign Currency Account.
importer to maintain a 'customs duty payment account' for periodic payments
6 Non Tariff Barriers: The need for companies to subject imported CBU (advance or prospective), as has been done for the payment of Excise duty
(Completely Built Units) to the homologation process should be reviewed at and Service tax, can simplify the import process and save valuable time.
least for models already certified by recognized German institutions.
Corporate taxes
Indirect taxes and duties
12 Transfer pricing: There needs to be a clear guidance note on how arms-
7 Multiple audits: Separate audits are conducted by the Government length price has to be calculated, in the context of the Indian transfer pricing
departments for matters relating to Central Excise and Service tax. Further, regulation. The present system of benchmarking transfer pricing to other
the State VAT departments may also conduct a separate VAT Audit. A lot of peer group industry participants at a generic level needs review. The
valuable time at periodic intervals is consumed in audits by different underlying profile and application of products or services needs to be
government departments. There is a need for better co-ordination between correctly ascertained, before deciding on the right comparable peer group
various government departments so as to accept a single standard audit rather than arbitrarily basing it to a loosely comparable benchmarks.
procedure that complies with varied requirements and purposes. 13 Ceiling on payment of royalties and technical know-how fees: The
8 Service Tax: At present, around 100 taxable services have been notified, current regulation restricts payment of royalties and technical know-how fees
with separate definitions for the activity and taxable services. At times there at 5 percent and 8 percent respectively. These payments being commercial
may be an overlap among two or more categories of taxable services. All in nature should be left for the parties to decide without any restrictions
this gives rise to various issues relating to classification. Further, in certain whatsoever.
situations it is difficult to determine the Service tax liability on combination
48 49
2 External Commercial Borrowings (ECB) Guidelines: The recent increase sale (products and services). It is therefore imperative that the Indian service
in local Indian interest rates have made it necessary for foreign companies tax regulation is made simple and easy to comply with. The Indian
in India to look at competitive international borrowing options. The stringent government may have to consider integrating Service Tax into VAT to
ECB Guidelines deny such companies the flexibility of accessing foreign harmonize it with global standards.
debt from parent/group entities or the international financial market at 9 Value Added Tax: The uncertainty relating to introduction and applicability of
commercially attractive terms. Considering the increasing need for Value Added Tax across Indian states, and the extent of sales tax liability
investment/capitalization of businesses in India, the regulations surrounding attributable to sales in certain states is a matter of grave concern and needs
ECB need to be reviewed and liberalized. to be expeditiously resolved. It has also been noticed that there is a lack of
Commercial considerations uniformity in the VAT laws prevalent in different States, leading to ambiguity
and difficulty in implementation for the businesses spread across the States.
3 Documentation: The extent of certifications and notarizations required in
Further, the tax credits are not available in case of inter state sales, thereby
the process of setting up an Indian entity needs an objective review. The
making it a cost to the transaction. There is a need for the system of Indian
Indian Authorities seem to insist on documents that are generally not insisted
taxes, collections and set-off to be harmonized with that of the EU, wherein
upon by similar Authorities in developed countries and which do not seem to
credits are ideally allowed even for transactions taking place within two
have much bearing on the process.
countries.
4 Product classification: The inconsistencies in classification of products as
10 Customs duty computation: The manner of computation of customs duty is
per different laws and regulations, make the approval and taxation
complex, particularly with frequent additions of new levies thereby making it
processes extremely complicated. There is an urgent need to streamline
difficult for companies to reliably assess the economic value of imports. The
classification of products in order to make the applicable regulatory
government should consider simplifying the process by subjecting imports to
processes simpler and transparent.
a flat rate of duty. While the customs duty rates have generally reduced, the
5 Insurance premium remittance: It is customary for global automotive incidence on imports in some cases (particularly for traders) continues to be
companies operating in India to buy liability insurance with respect to all high at around 34 percent.
vehicles sold locally. The extent of insurance is fairly large for any local
11 Custom duty payment: At present, the duty is required to be paid for each
Indian insurance company to cover it, thereby compelling such insurance to
import before the clearance of the imported goods. Often, the process of
be bought globally. The foreign remittance of such premium is not allowed as
releasing imported goods from custom-bonded warehouses gets delayed, till
per the Indian regulation. There is a need to consider such payment at least
the correct duties on them are calculated and paid. A system allowing the
from the Export Earners Foreign Currency Account.
importer to maintain a 'customs duty payment account' for periodic payments
6 Non Tariff Barriers: The need for companies to subject imported CBU (advance or prospective), as has been done for the payment of Excise duty
(Completely Built Units) to the homologation process should be reviewed at and Service tax, can simplify the import process and save valuable time.
least for models already certified by recognized German institutions.
Corporate taxes
Indirect taxes and duties
12 Transfer pricing: There needs to be a clear guidance note on how arms-
7 Multiple audits: Separate audits are conducted by the Government length price has to be calculated, in the context of the Indian transfer pricing
departments for matters relating to Central Excise and Service tax. Further, regulation. The present system of benchmarking transfer pricing to other
the State VAT departments may also conduct a separate VAT Audit. A lot of peer group industry participants at a generic level needs review. The
valuable time at periodic intervals is consumed in audits by different underlying profile and application of products or services needs to be
government departments. There is a need for better co-ordination between correctly ascertained, before deciding on the right comparable peer group
various government departments so as to accept a single standard audit rather than arbitrarily basing it to a loosely comparable benchmarks.
procedure that complies with varied requirements and purposes. 13 Ceiling on payment of royalties and technical know-how fees: The
8 Service Tax: At present, around 100 taxable services have been notified, current regulation restricts payment of royalties and technical know-how fees
with separate definitions for the activity and taxable services. At times there at 5 percent and 8 percent respectively. These payments being commercial
may be an overlap among two or more categories of taxable services. All in nature should be left for the parties to decide without any restrictions
this gives rise to various issues relating to classification. Further, in certain whatsoever.
situations it is difficult to determine the Service tax liability on combination
48 49
14 Group consolidation: Inability of the loss incurred by a group company to
Way Forward
be set-off against the profit of another group company is at variance to the
Group Consolidation concept commonly prevalent in the EU Countries. In India and Germany have shown robust growth in bilateral trade in the last few
years. The momentum is expected to continue and FICCI-KPMG estimates the
absence thereof, people take recourse to corporate structuring which is trade between two countries to surpass 20 billion Euros in the next five years,
cumbersome and time consuming. India should look to adopt this principle. i.e. 2012. Bilateral investments are also expected to see a substantial growth.
15 Sunset clause: With the improving state of the Indian economy and foreign What gives us the optimism about achieving these targets are the
complementarities the two sides enjoy. As this in-depth research report shows,
exchange reserves, the Government is proposing a gradual phase-out of there are several areas in which our ties will become stronger in the coming
income-tax benefits on export-related profits. There has been lot of years.
discussion on the extension of the 'sunset date' of 31 March 2009, applicable There is a great opportunity for Indian firms to cooperate with German
to export profits of Software Technology Parks /Export Oriented Units. The companies in the areas of Defence, Science & Technology, and Logistics and
forge a closer working relationship between the SMEs in both the countries. It is
Government should announce its decision on the subject now rather then expected that many more initiatives, activities, visits and agreements will be
later, as this will facilitate business / investment planning for foreign seen in these sectors in the coming years.
investors. German companies would like to exploit the huge market potential in India in
sectors like Auto, Retail, Electronics, Aviation and Entertainment industry. We
Expatriate Issues are confident that the scope of cooperation and German investment will
substantially increase in all these sectors in the near future.
16 Fringe Benefit Tax: This tax levied on the employer in respect of perquisites
granted to employees needs to be reviewed. The additional burden of the However, as we go ahead, there are a few issues which need to be addressed.
As pointed out by this study, based on an extensive survey carried out among
Fringe Benefit Tax is generally transferred (directly or indirectly) to the cost of Indian and German companies which are doing business in both the countries,
the Indian product / services thereby impacting its competitiveness. In the there is a need to review issues pertaining to Investment Regulations, Indirect
Taxes and Duties, Corporate taxes, Wage related issues , Labour Laws and
interest of promoting India's position as a preferred global sourcing Immigration Laws for making the business environment more conducive in both
destination, the levy of Fringe Benefit Tax needs to be reviewed. the countries. We hope that the relevant authorities in both countries would take
note of the same. .
17 Foreigners Registration Act: Foreign expatriates coming to India to reside
If the above issues are expeditiously addressed, we believe that our business
for over 180 days are required to register themselves with the Foreigners and economic engagement would get a strong boost and commercial ties
Regional Registration Office (FRRO). The FRRO has jurisdiction over the between the two countries would be further strengthened.
place where the foreign expatriate's residence is proposed. In case the

expatriate is likely to temporarily shift residence for a period exceeding eight
weeks, he is under obligation to notify the first FRRO about his absence, and
simultaneously inform the new FRRO (with jurisdiction over the new place)
about such intent of residence. This is an extremely cumbersome and time
consuming process and needs to be reviewed.
Immigration laws
18 Visa: Considering the conscious efforts on sides of both governments to

promote trade, investment and tourism and likely increase in cross-border
travel, there appears a need for reciprocally abolishing or at least reducing
fees for visa on the Indo-German corridor.
Labor laws
19 Employee lay-offs: In order for a business in India with at least one hundred
employees to be shut down, prior permission of the state government is
mandatory. There may be a need to review this threshold for state
government approval and increase it to around 300 people.
50 51
14 Group consolidation: Inability of the loss incurred by a group company to
Way Forward
be set-off against the profit of another group company is at variance to the
Group Consolidation concept commonly prevalent in the EU Countries. In India and Germany have shown robust growth in bilateral trade in the last few
years. The momentum is expected to continue and FICCI-KPMG estimates the
absence thereof, people take recourse to corporate structuring which is trade between two countries to surpass 20 billion Euros in the next five years,
cumbersome and time consuming. India should look to adopt this principle. i.e. 2012. Bilateral investments are also expected to see a substantial growth.
15 Sunset clause: With the improving state of the Indian economy and foreign What gives us the optimism about achieving these targets are the
complementarities the two sides enjoy. As this in-depth research report shows,
exchange reserves, the Government is proposing a gradual phase-out of there are several areas in which our ties will become stronger in the coming
income-tax benefits on export-related profits. There has been lot of years.
discussion on the extension of the 'sunset date' of 31 March 2009, applicable There is a great opportunity for Indian firms to cooperate with German
to export profits of Software Technology Parks /Export Oriented Units. The companies in the areas of Defence, Science & Technology, and Logistics and
forge a closer working relationship between the SMEs in both the countries. It is
Government should announce its decision on the subject now rather then expected that many more initiatives, activities, visits and agreements will be
later, as this will facilitate business / investment planning for foreign seen in these sectors in the coming years.
investors. German companies would like to exploit the huge market potential in India in
sectors like Auto, Retail, Electronics, Aviation and Entertainment industry. We
Expatriate Issues are confident that the scope of cooperation and German investment will
substantially increase in all these sectors in the near future.
16 Fringe Benefit Tax: This tax levied on the employer in respect of perquisites
granted to employees needs to be reviewed. The additional burden of the However, as we go ahead, there are a few issues which need to be addressed.
As pointed out by this study, based on an extensive survey carried out among
Fringe Benefit Tax is generally transferred (directly or indirectly) to the cost of Indian and German companies which are doing business in both the countries,
the Indian product / services thereby impacting its competitiveness. In the there is a need to review issues pertaining to Investment Regulations, Indirect
Taxes and Duties, Corporate taxes, Wage related issues , Labour Laws and
interest of promoting India's position as a preferred global sourcing Immigration Laws for making the business environment more conducive in both
destination, the levy of Fringe Benefit Tax needs to be reviewed. the countries. We hope that the relevant authorities in both countries would take
note of the same. .
17 Foreigners Registration Act: Foreign expatriates coming to India to reside
If the above issues are expeditiously addressed, we believe that our business
for over 180 days are required to register themselves with the Foreigners and economic engagement would get a strong boost and commercial ties
Regional Registration Office (FRRO). The FRRO has jurisdiction over the between the two countries would be further strengthened.
place where the foreign expatriate's residence is proposed. In case the

expatriate is likely to temporarily shift residence for a period exceeding eight
weeks, he is under obligation to notify the first FRRO about his absence, and
simultaneously inform the new FRRO (with jurisdiction over the new place)
about such intent of residence. This is an extremely cumbersome and time
consuming process and needs to be reviewed.
Immigration laws
18 Visa: Considering the conscious efforts on sides of both governments to

promote trade, investment and tourism and likely increase in cross-border
travel, there appears a need for reciprocally abolishing or at least reducing
fees for visa on the Indo-German corridor.
Labor laws
19 Employee lay-offs: In order for a business in India with at least one hundred
employees to be shut down, prior permission of the state government is
mandatory. There may be a need to review this threshold for state
government approval and increase it to around 300 people.
50 51
About FICCI About KPMG in India
When Mahatma Gandhi spoke on the occasion of FICCI's 4th Annual Session on
April 7, 1931, he had said, “The industrial classes could even take over the KPMG is a global network of professional services firms of KPMG International.
Congress's reins but on one condition. They should regard themselves as Our member firms provide audit, tax and advisory services through industry
trustees and servants of the poor.” More than 75 years later, this still holds true for focused, talented professionals who deliver value for the benefit of their clients
India's oldest and largest apex chamber of business organizations. The
and communities. With nearly 113,000 people worldwide, KPMG member firms
Federation of Indian Chambers of Commerce and Industry (FICCI), set up in
1927, a by-product of India's freedom movement, remains committed to the provide services in 148 countries.
values of inclusive growth, quality, accountability, promoting business-
government-civil society partnerships to spread ethical business practices in order KPMG's member firms in India were established in September 1993. As
to enhance the lives of the common people, while being the prime voice of members of a cohesive business unit, our professionals respond to client service
corporate India in these changing times.
requirements by leveraging the resources of KPMG's global network of firms,
Over the past decades FICCI has become the nodal point for industries of providing detailed knowledge of local laws, regulations, markets and competition.
countries all around the world to interact with Indian businesses and resolve
We work with over 2,000 international and national clients, in India. KPMG in
mutual business issues. It has been fortunate to have hosted all the Presidents
and Prime Ministers of India and heads of state from all over globe, from India has offices in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and
President Eisenhower to George Bush, Nikita Khrushchev to Vladimir Putin, Lord Pune; with access to more than 2,000 Indian and expatriate professionals, many
Irwin to Tony Blair. FICCI's expert committees and task forces, headed by leading of whom are internationally trained. We strive to provide rapid, performance-
industrialists, regularly meet to deliberate upon issues pertaining to Agriculture, based, industry-focused and technology-enabled services, which reflect a shared
Banking and Finance, Defence, Environment, Education, Healthcare, Information knowledge of global and local industries and our experience of the Indian
Technology, Foreign Trade among many others, and communicate on behalf of
business environment.
corporate India with the government. FICCI's international division, comprising
Joint Business Councils (JBCs) with as many as 79 countries, conducts track two
diplomatic negotiations and opens up new business opportunities for Indian
businessmen.
The Forum of Parliamentarians, supported by FICCI, seek to encourage inter-
parliamentary dialogue on critical issues and towards enriching bilateral political
equations, and comprises Indo-US, Indo-British, Indo-German, Indo-European
Union, India-Japan, India-Singapore and India-Pakistan fora. Acting as a change
agent, FICCI has contributed significantly to the country's economy by helping
international and domestic trade and facilitating flow of investment into the
country.
FICCI is headquartered in Delhi with a state-of-the art secretariat which houses
165 economists and MBA's and serves as one of the country's largest think-tanks
providing assistance to the government and industry through constant studies and
surveys. It has branches in major Indian cities and key regions in the world such
as US, UK, Italy, Malaysia, China, Singapore, Thailand and Kazakhstan.
52 53
About FICCI About KPMG in India
When Mahatma Gandhi spoke on the occasion of FICCI's 4th Annual Session on
April 7, 1931, he had said, “The industrial classes could even take over the KPMG is a global network of professional services firms of KPMG International.
Congress's reins but on one condition. They should regard themselves as Our member firms provide audit, tax and advisory services through industry
trustees and servants of the poor.” More than 75 years later, this still holds true for focused, talented professionals who deliver value for the benefit of their clients
India's oldest and largest apex chamber of business organizations. The
and communities. With nearly 113,000 people worldwide, KPMG member firms
Federation of Indian Chambers of Commerce and Industry (FICCI), set up in
1927, a by-product of India's freedom movement, remains committed to the provide services in 148 countries.
values of inclusive growth, quality, accountability, promoting business-
government-civil society partnerships to spread ethical business practices in order KPMG's member firms in India were established in September 1993. As
to enhance the lives of the common people, while being the prime voice of members of a cohesive business unit, our professionals respond to client service
corporate India in these changing times.
requirements by leveraging the resources of KPMG's global network of firms,
Over the past decades FICCI has become the nodal point for industries of providing detailed knowledge of local laws, regulations, markets and competition.
countries all around the world to interact with Indian businesses and resolve
We work with over 2,000 international and national clients, in India. KPMG in
mutual business issues. It has been fortunate to have hosted all the Presidents
and Prime Ministers of India and heads of state from all over globe, from India has offices in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and
President Eisenhower to George Bush, Nikita Khrushchev to Vladimir Putin, Lord Pune; with access to more than 2,000 Indian and expatriate professionals, many
Irwin to Tony Blair. FICCI's expert committees and task forces, headed by leading of whom are internationally trained. We strive to provide rapid, performance-
industrialists, regularly meet to deliberate upon issues pertaining to Agriculture, based, industry-focused and technology-enabled services, which reflect a shared
Banking and Finance, Defence, Environment, Education, Healthcare, Information knowledge of global and local industries and our experience of the Indian
Technology, Foreign Trade among many others, and communicate on behalf of
business environment.
corporate India with the government. FICCI's international division, comprising
Joint Business Councils (JBCs) with as many as 79 countries, conducts track two
diplomatic negotiations and opens up new business opportunities for Indian
businessmen.
The Forum of Parliamentarians, supported by FICCI, seek to encourage inter-
parliamentary dialogue on critical issues and towards enriching bilateral political
equations, and comprises Indo-US, Indo-British, Indo-German, Indo-European
Union, India-Japan, India-Singapore and India-Pakistan fora. Acting as a change
agent, FICCI has contributed significantly to the country's economy by helping
international and domestic trade and facilitating flow of investment into the
country.
FICCI is headquartered in Delhi with a state-of-the art secretariat which houses
165 economists and MBA's and serves as one of the country's largest think-tanks
providing assistance to the government and industry through constant studies and
surveys. It has branches in major Indian cities and key regions in the world such
as US, UK, Italy, Malaysia, China, Singapore, Thailand and Kazakhstan.
52 53
Federation of Indian Chambers
of Commerce and Industry
KPMG in India KPMG Contacts FICCI Head Quarters:

Mumbai India Federation of Indian Chambers
KPMG House, Kamala Mills Compound Pradeep Udhas, Head – Markets of Commerce and Industry
448, Senapati Bapat Marg, Lower Parel Tel: +91 22 3983 5400 Federation House,
Mumbai 400 013 Fax: +91 22 3983 6000 Tansen Marg,
Tel: +91 22 3989 6000 e-Mail: pudhas@kpmg.com New Delhi - 110 001
Fax: +91 22 3983 6000 Phone : 91-11-23738760-70 (11 Lines)
Sanjay Kumar, Associate Director (Research) Fax : 91-11-23320714, 23721504
Delhi Head of India Research Centre E-mail : ficci@ficci.com
4B, DLF Corporate Park Ph.: +91 (22) 3983 6225 Website : www.ficci.com
DLF City, Phase III, Gurgaon 122 002 Fax: 91 22 3983 6000
Tel: +91 124 307 4000 Email: skumar1@kpmg.com Contact:
Fax: +91 124 254 9101 Ambika Sharma
Assistant Secretary General
Pune Germany E-mail: ambika@ficci.com
703, Godrej Castlemaine Gautam Chemburkar, Director India
India and Germany

New and Emerging Markets Practice
Bund Garden, Pune 411 001
KPMG Deutsche Treuhand-Gesellschaft
FICCI Offices:
Tel: +91 20 3058 5764/65
Aktiengesellschaft, Michaelis Quartier
Fax: +91 20 3058 5775
Ludwig-Erhard Straße 11-17 India
D-20459 Hamburg Mumbai
Bangalore Tel +49 (40) 320 15-5649
Maruthi Info-Tech Centre Chennai
11-12/1, Inner Ring Road, Koramangala
Mobile +49 1520 3870179
Fax +49 1802 11991-6987
Kolkata
Ahmedabad
Two great countries engaging to take
Bangalore 560 071 E mail : gautamchemburkar@kpmg.com Bangalore
Tel: +91 80 3980 6000
Fax: +91 80 3980 6999 Bhopal economic relations to a new level
Johannes Martin Böhmer, Director India Cochin
New and Emerging Markets Practice Hyderabad
Chennai KPMG Deutsche Treuhand-Gesellschaft
No. 10 Mahatma Gandhi Road Aktiengesellschaft, Michaelis Quartier
Jaipur
Margao
A Knowledge Paper
Nungambakkam Ludwig-Erhard Straße 11-17 Raipur
Chennai 600 034 D-20459 Hamburg
Tel: +91 44 3914 5000
Fax: +91 44 3914 5999
Tel +49 (40) 320 15-5680
Mobile +49 173 576 4147 International September 2007
Fax +49 1802 11991-7059 USA
Hyderabad E mail : jboehmer@kpmg.com UK
II Floor, Merchant Towers Italy
Road No. 4, Banjara Hills China
Hyderabad 500 034 Malaysia
Tel: +91 40 2335 0060 Singapore
Fax: +91 40 2335 0070 Thailand
Kazakhstan
Kolkata
Park Plaza, Block F, Floor 6
71 Park Street
Kolkata 700 016
Tel: +91 33 2217 2858
Fax: +91 33 2217 2868
The information contained herein is of a general nature and is not intended to © 2007 KPMG, an Indian Partnership and a member firm of the
address the circumstances of any particular individual or entity. Although we KPMG network of independent member firms affiliated with KPMG
endeavor to provide accurate and timely information, there can be no guarantee that International, a Swiss cooperative. All rights reserved. KPMG and
such information is accurate as of the date it is received or that it will continue to be the KPMG logo are registered trademarks of KPMG International, a
accurate in the future. No one should act on such information without appropriate Swiss cooperative. Printed in India.
professional advice after a thorough examination of the particular situation.
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Federation of Indian Chambers

of Commerce and Industry

KPMG in India KPMG Contacts FICCI Head Quarters:

India and Germany

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I INDO-GERMAN BUSINESS OVERVIEW 3

Automotive and Components 7

Food, Consumer Goods and Retailing 21

Hardware and Electronics 23

Media and Entertainment 28

Science and Technology 32

SME – SME Cooperation 36

Transport and Logistics 41

II LOCAL BUSINESS ENVIRONMENT AND 43

I INDO-GERMAN BUSINESS OVERVIEW 3

Automotive and Components 7

Food, Consumer Goods and Retailing 21

Hardware and Electronics 23

Media and Entertainment 28

Science and Technology 32

SME – SME Cooperation 36

Transport and Logistics 41

II LOCAL BUSINESS ENVIRONMENT AND 43

With buoyant economic environment, recent track record of over 9 percent

While the prospect of sectors such as IT, Telecommunications, Healthcare and

We are confident that this publication will be instrumental in further strengthening

Dr Amit Mitra Pradeep Udhas

While expansion of domestic investment is essential, there is immense potential

India and Germany- An Economic Overview

Interplay of economic reforms combined with sound policy regime, favourable

The German Economy: As Europe's largest economy and second most

4000000 400000 307308

l Exchange of Notes on the protection of German investments in India on 15

4000000 400000 307308

l Exchange of Notes on the protection of German investments in India on 15

Total No of Plants in Europe : 126

Total No of Plants in Europe : 126

Hindustan Aeronautics Limited (HAL) has gone on to produce, the Advanced

Hindustan Aeronautics Limited (HAL) has gone on to produce, the Advanced

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Year (as of) Potential* Cumulative Generated Distributed

few years. Although a relative

Xith Plan (2007-12) 2483

Year (as of) Potential* Cumulative Generated Distributed

few years. Although a relative

Xith Plan (2007-12) 2483

Source: AMFI Source: SSKI Report on NBFC, 2006

Source: AMFI Source: SSKI Report on NBFC, 2006

Breakdown of organised retailing (2006)

Breakdown of organised retailing (2006)

India’s Electronic Production

India has the potential to emerge as the next hub of semiconductor

According to the India Semiconductor Association (ISA), India has already

India’s Electronic Production

India has the potential to emerge as the next hub of semiconductor

According to the India Semiconductor Association (ISA), India has already

The Indian electronics industry, which uses consumes semiconductors, is

The Indian electronics industry, which uses consumes semiconductors, is

Investment plans of major Telco 2007-08 (EUR billion)

Source: COAI, Company and investment reports, Business Standard

India, in order to support this phenomenal growth, will require massive

Manufacturing plans of key equipment vendors in India

Investment plans of major Telco 2007-08 (EUR billion)